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Determinants of market integration and price transmission in Indonesia

Author

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  • Varela, Gonzalo
  • Aldaz-Carroll, Enrique
  • Iacovone, Leonardo

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.

Suggested Citation

  • Varela, Gonzalo & Aldaz-Carroll, Enrique & Iacovone, Leonardo, 2012. "Determinants of market integration and price transmission in Indonesia," Policy Research Working Paper Series 6098, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6098
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    References listed on IDEAS

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    Cited by:

    1. Mu, Y., 2018. "Pork price transmission and efficiency in China," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277387, International Association of Agricultural Economists.
    2. Paul, R.K. & Saxena, R. & Bhat, S.A., 2016. "How Price Signals in Pulses are Transmitted across Regions and Value Chain? Examining Horizontal and Vertical Market Price Integration for Major Pulses in India," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 29(Conferenc).
    3. Oktarina, Yetty, 2015. "Rice Market Integration In Southern Sumatra, Indonesia," International Journal of Agricultural Research, Innovation and Technology (IJARIT), IJARIT Research Foundation, vol. 5(2), December.
    4. Varela,Gonzalo J. & Cali,Massimiliano & Pape,Utz Johann & Rojas,Esteban, 2016. "Market integration and poverty : evidence from South Sudan," Policy Research Working Paper Series 7564, The World Bank.
    5. Beag, F.A. & Singla, N., 2014. "Cointegration, Causality and Impulse Response Analysis in Major Apple Markets of India," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 27(2).
    6. Kirchberger, Martina, 2017. "Natural disasters and labor markets," Journal of Development Economics, Elsevier, vol. 125(C), pages 40-58.
    7. Burhan Ahmad & Ole Gjølberg, 2015. "Are Pakistan’s Rice Markets Integrated Domestically and With the International Markets?," SAGE Open, , vol. 5(3), pages 21582440155, July.
    8. Boffa,Mauro & Varela,Gonzalo J., 2019. "Integration and Price Transmission in Key Food Commodity Markets in India," Policy Research Working Paper Series 8755, The World Bank.
    9. Shinyekwa, Isaac & Ijjo, Alex, 2016. "Determinants Of Domestic Food Price Differentials In Uganda: The Potential for and Constraints on Intra-County Trade," Research Reports 253556, Economic Policy Research Centre (EPRC).
    10. Martina Kirchberger, 2014. "Natural Disasters and Labour Markets," Economics Series Working Papers WPS/2014-19, University of Oxford, Department of Economics.
    11. Saxena, R. & Paul, R.K. & Pavithra, S. & Singh, N. P. & Kumar, R., 2019. "Market Intelligence in India Price Linkages and Forecasts," Policy Papers 344987, ICAR National Institute of Agricultural Economics and Policy Research (NIAP).
    12. Paul, R.K. & Saxena, R. & Chaurasia, S. & Zeeshan & Rana, S., 2015. "Examining Export Volatility, Structural Breaks in Price Volatility and Linkages between Domestic and Export Prices of Onion in India," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 28(Conferenc).
    13. Varela, Gonzalo J., 2012. "Incomplete, slow, and asymmetric price transmission in ten product markets of Bolivia," Policy Research Working Paper Series 6291, The World Bank.

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    Keywords

    Markets and Market Access; Transport Economics Policy&Planning; Access to Markets; Climate Change Economics; Emerging Markets;
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