Determinants of Market Integration and Price Transmission in Indonesia

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.

Bibliographic Details

Main Authors:	Varela, Gonzalo, Aldaz-Carroll, Enrique, Iacovone, Leonardo
Language:	English en_US
Published:	World Bank, Washington, DC 2012-06
Subjects:	AGRICULTURAL ECONOMICS, ALLOWANCE, ARBITRAGE, AVERAGE PRICE, AVERAGE PRICES, CHANGES IN PRICES, CLIMATE, COMMODITIES, COMMODITY, COMMODITY MARKETS, COMMODITY PRICE, COMMODITY PRICES, CONSUMER PRICE, DATA AVAILABILITY, DEVELOPING COUNTRIES, DEVELOPING ECONOMIES, DEVELOPMENT ECONOMICS, DOMESTIC MARKETS, DOMESTIC PRICES, DOMESTIC PRODUCTION, DRIVERS, EFFICIENT MARKETS, ELASTICITIES, GOOD TRANSPORT, GOVERNMENT INTERVENTION, INCOME, INFORMATION FLOWS, INTERNATIONAL MARKET, INVESTMENT CLIMATE, LOWER PRICE, MARKET DEVELOPMENT, MARKET INFORMATION, MARKET INTEGRATION, MARKET POTENTIAL, MARKET POWER, MARKETING, NATURAL RESOURCE, OPEN ECONOMY, OUTPUT, PER CAPITA INCOME, POLICY IMPLICATIONS, POLITICAL ECONOMY, PRICE BEHAVIOR, PRICE DIFFERENTIAL, PRICE DIFFERENTIALS, PRICE DISCRIMINATION, PRICE MOVEMENTS, PRICE SERIES, PRICE SETTING, PRIVATE INVESTMENT, PRODUCER PRICE, PRODUCT QUALITY, PUBLIC POLICY, PUBLIC WORKS, PURCHASING, PURCHASING POWER, QUALITY OF TRANSPORT, RAILWAY, REMOTE REGION, RETAIL, ROAD, ROAD TRANSPORT, ROADS, SALES, SPREAD, STOCKS, TRANSACTION COSTS, TRANSPORT COSTS, TRANSPORT INFRASTRUCTURE, TRANSPORTATION, TRANSPORTATION COST, TRANSPORTATION COSTS, VOLATILITY, WORLD MARKET, WORLD MARKETS,
Online Access:	http://documents.worldbank.org/curated/en/2012/06/16396524/determinants-market-integration-price-transmission-indonesia https://hdl.handle.net/10986/9312
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