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Transportation Costs in Archipelagos: Evidence from Indonesia

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  • Kazunobu Hayakawa
  • Ikumo Isono
  • Satoru Kumagai

Abstract

This paper empirically examines 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 expensive than land transportation. For example, a 1% increase in distance in maritime and land transportation increases the price of televisions 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 countries on a continent; thus, archipelagic countries have a topographical disadvantage.

Suggested Citation

  • Kazunobu Hayakawa & Ikumo Isono & Satoru Kumagai, 2020. "Transportation Costs in Archipelagos: Evidence from Indonesia," The Developing Economies, Institute of Developing Economies, vol. 58(3), pages 227-241, September.
    • Handle: RePEc:bla:deveco:v:58:y:2020:i:3:p:227-241
    DOI: 10.1111/deve.12249
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    Cited by:

    1. Yilmazkuday, Hakan, 2012. "Understanding interstate trade patterns," Journal of International Economics, Elsevier, vol. 86(1), pages 158-166.
    2. Sofiyandi, Yusuf & Kurniawan, Yusuf Reza & Yudhistira, Muhammad Halley, 2023. "The impact of maritime logistics subsidy on food prices: Evidence from Indonesia," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 1026-1045.

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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