INTEGRATION AMONG REGIONAL VEGETABLE MARKETS IN INDONESIA

Abstract

Horticulture played an important role in the Indonesian economy. Its share of GDP, which was dominated by vegetables and fruits, tended to increase since 2003 up to 2008. However Indonesian per capita consumption of vegetables was still under FAO recommendation. The study of price integration among regions is important in order to increase the marketing efficiency of vegetables in Indonesia. Government intervention is needed both at the producer and consumer level, especially in determining the efficient prices. The success of this intervention depends heavily on government’s understanding of price transmission in the fruits market. This research measured the integration level of regional vegetables markets in Indonesia. Engle-Granger test showed that all vegetable prices at PIKJ integrated with producer’s prices, except red chili price. Ravallion model showed that integration did not exist for all commodities . However, there was no significant difference of the market integration performance between the highest and the lowest production area.