Determinants of Market Integration and Price Transmission in Indonesia

38 Pages Posted: 20 Apr 2016

See all articles by Gonzalo Varela

Gonzalo Varela

World Bank

Enrique Aldaz-Carroll

World Bank - PREM Trade

Leo Iacovone

World Bank; University of Sussex

Date Written: June 1, 2012

Abstract

This paper investigates the determinants of price differences and market integration among Indonesian provinces, using data from retail cooking oil, rice and sugar markets during the period 1993-2007, and from wholesale maize and soybean markets during the period 1992-2006. The authors measure the degree of integration using co-integration techniques, and calculate average price differences. They use regression analysis to understand the drivers of price differences and market integration. For rice and sugar, they find wide market integration and low price differences, in the range of 5-12 percent. For maize, soybeans and cooking oil, they find less integration and higher price differences (16-22 percent). Integration across provinces is explained by the remoteness and quality of transport infrastructure of a province. Price differences across provinces respond to differences in provincial characteristics such as remoteness, transport infrastructure, output of the commodity, land productivity and income per capita.

Keywords: Markets and Market Access, Transport Economics Policy & Planning, Access to Markets, Climate Change Economics, Emerging Markets

Suggested Citation

Varela, Gonzalo and Aldaz-Carroll, Enrique and Iacovone, Leonardo, Determinants of Market Integration and Price Transmission in Indonesia (June 1, 2012). World Bank Policy Research Working Paper No. 6098, Available at SSRN: https://ssrn.com/abstract=2087972

Gonzalo Varela (Contact Author)

World Bank ( email )

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Washington, DC 20433
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Enrique Aldaz-Carroll

World Bank - PREM Trade ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Leonardo Iacovone

World Bank ( email )

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Washington, DC 20433
United States

HOME PAGE: http://www.worldbank.org

University of Sussex ( email )

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United Kingdom

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