Village Productivity Index (VPI) / Indeks Produktivitas Desa (IPD) - A New Framework for Measuring Rural Economic Contribution Beyond Administrative Performance

This paper introduces the Village Productivity Index (VPI), also designated by its Indonesian term Indeks Produktivitas Desa (IPD), a conceptually novel composite index for measuring the economic productivity of Indonesian villages as productive units within the national economic architecture. Indonesia's prevailing village performance measurement instruments notably the Village Development Index (Indeks Desa Membangun/IDM) and the SDGs Desa framework are fundamentally oriented toward administrative compliance, social service delivery, and program implementation metrics. They do not capture a village's capacity to generate economic value, mobilize productive factors, or contribute measurably to subnational and national economic output. This gap is conceptualized in the present paper as the 'Productivity Measurement Deficit' in Indonesian village governance. Drawing upon institutional economics, productivity theory, development economics, and the theory of productive territorial units, this paper argues that the dominant paradigm of Indonesian village governance must undergo a structural shift from the 'administrative village' model toward the 'productive village' model. The theoretical apparatus integrates (a) Pritchett, Woolcock, and Andrews's (2013) framework of isomorphic mimicry to explain why administrative compliance metrics systematically crowd out productivity measurement; (b) North's (1990) institutional economics; (c) total factor productivity theory adapted to territorial units; and (d) the OECD New Rural Paradigm (2006, 2016, 2019). The VPI is operationalized through five weighted dimensions, namely (1) Agricultural and Primary Sector Productivity (25%), (2) Local Economic Diversification (20%), (3) Labor Productivity and Human Capital Utilization (20%), (4) Village Fiscal Efficiency and Economic Return on Dana Desa (20%), and (5) Linkage and Market Integration (15%). To mitigate the well-documented sensitivity of min-max normalization to outliers, this paper adopts a Winsorized normalization procedure at the 5th and 95th national percentiles. The Dana Desa Economic Return dimension employs a three-year moving average to account for capital circulation lags in rural economies. A simulation exercise on three hypothetical village archetypes demonstrates the index's discriminatory power. Comparative analysis against IDM, SDGs Desa, HDI, and the OECD Rural Development Framework confirms the VPI's superior focus on economic productivity. The paper concludes with a ten-year national implementation roadmap and policy recommendations for integrating VPI scores into Dana Desa allocation formulae, fiscal transfer incentive structures, and national rural development planning.