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Transportation costs in archipelagos: evidence from Indonesia

Kazunobu Hayakawa (), Isono Ikumo and Kumagai Satoru

No 756, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: In this paper, we empirically examine the effects of domestic transportation costs on product prices in an archipelagic country, namely, Indonesia. Specifically, we investigate the province-level price of televisions. Our analysis reveals that maritime transportation is more costly than land transportation. For example, a 1% increase in distance in maritime and land transportation increases a product price by 0.08% and 0.02%, respectively. This result implies that the geographical concentration or agglomeration of industries is much costlier in archipelagic countries. In other words, enjoying agglomeration effects is more difficult for archipelagic countries compared with single-island countries; in this sense, archipelagic countries have a topographical disadvantage.

Keywords: Price; Indonesia; Transport; Transportation (search for similar items in EconPapers)
JEL-codes: F15 F53 (search for similar items in EconPapers)
Date: 2019-04
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 756. 2019-04

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