A decade of strong economic growth and rapid urbanization are transforming Indonesia’s food retail sector. In particular, supermarkets and related modern retail outlets are reorganizing how high value fruit and vegetable supply chains operate, effecting quantities, varieties, quality and prices. Among the agricultural development issues facing Indonesia’s policymakers are efficiency and distributional consequences of these transforming fruit and vegetable markets. This study examines asymmetric price transmission in chili supply chains to assess emerging market failures and potential equity implications for producers and consumers. The Indonesian government recognizes chilies as one of its 10 priority crops. Chilies are produced by more than 400,000 small scale producers and are an essential ingredient in the Indonesian daily diet. Historically, chili markets have exhibited large price fluctuations in Indonesia. Two methods for examining asymmetric price transmission are compared using monthly data over an 18 year period in Java: Houck’s model and the Error Correction Model (ECM). Although commonly believed that modern retail sectors are increasing market power and influencing prices, both models suggest that there is no price asymmetry issue in the chili supply chain in Indonesia.
Key word: chili, price, asimetric, transmission
Aguiar, D.R.D., and Santana, J.A. 2005. Asymmetry in farm to retail price transmission; evidence from Brazil. Agribusiness, 21(2), 273286.
Asche, F., Shabbar Jaffry, S., and Hartmann, J. 2007. Price transmission and market integration: vertical and horizontal price linkages for salmon. Applied Economics, 39(2535-2545).
Bakucs, L.Z., and Fertõ, I. 2005. Marketing margins and price transmission on the Hungarian pork meat market. Agribusiness, 21(2), 273-286.
Balcombe, K., Bailey, A., and Brooks, J. 2007. Threshold effects in price transmission: the case of Brazilian wheat, maize, and soya prices. American Journal of Agricultural Economics, 89(2), 308-323.
Capps, O., and Sherwell, P. 2007. Alternative approaches in detecting asymmetry in farmretail price transmission of fluid milk. Journal of Agribusiness, 23(3), 313-331.
Center for Domestic Trade Policy. 2011. Price disparity in chili market. Trade Policy Analysis and Development Agency, The Ministry of Trade, Jakarta.
Central Bureau of Statistics. 2008. Statistics Indonesia. Central Bureau of Statistics, Jakarta.
Central Bureau of Statistics. From various years. 2003-2008a. Producer price statistics of agricultural sector in Indonesia. Central Bureau of Statistics, Jakarta.
Central Bureau of Statistics. From various years. 2003-2008b. Consumer price statistics in Indonesia. Central Bureau of Statistics, Jakarta.
Cutts, M., and Kirsten, J. 2006. Asymmetric price transmission and market concentration: an investigation into four South African agro-food industries South African Journal of Economics, 74(2), 323-333.
Department of Agriculture. From various years, 1995-2008. Agricultural statistics. Department of Agriculture, Jakarta.
Department of Agriculture. 2003. Agricultural statistics. Department of Agriculture, Jakarta.
Department of Agriculture. 2008a. Outlook of agricultural commodities (horticulture). Department of Agriculture, Jakarta.
Department of Agriculture. 2008b. Agricultural statistics. Department of Agriculture, Jakarta.
Frey, G., and Manera, M. 2007. Econometric models of asymmetric price transmission. Journal of Economic Surveys, 21(2), 349-415.
Granger, C.W.J., and Engle, R.F. 1987. Cointegration and Error Correction: representation, estimation and testing. Econometrica, 55(251-276).
Houck, P.J. 1977. An approach to specifying and estimating nonreversible functions. American Journal of Agricultural Economics, 59,570-572.
Johansen, S., and Juselius, K. 1990. Maximum likelihood estimation and inference on cointegrationwith applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52, 169-210.
Kinnucan, H.W., and Forker, O.D. 1987. Asymmetry in farm-retail price transmission for major dairy products. American Journal of Agricultural Economics, 69, 285292.
Koutroumanidis, T., Zafeiriou, E., and Arabatzis, G. 2009. Asymmetry in price transmission between the producer and the consumer prices in the wood sector and the role of imports: the case of Greece. Forest Policy and Economics, 11, 56-64.
Meyer, J., and v. Cramon-Taubadel, S. 2004. Asymmetric price transmission: a survey. Journal of Agricultural Economics, 55(3), 581-611.
Miller, D.J., and Hayenga, M.L. 2001. Price cycles and asymmetric price transmission in the US Pork Market. American Journal of Agricultural Economics, 83(3), 551-562.
No, S.C., Zapata, H.O., Salassi, M.E., and Gauthier, W.M. 2004. Asymmetry in farm-milled rice price transmission in the major rice producing states in the U.S. The Journal of AmericanAcademy of Business, March, 460-463.
Pandin, M.I. 2009. The potraite of retail Business in Indonesia: Retail modern. Economic Review, 215.
Pfaff, K., Anders, S., and Herrmann, R. 2003. Processing costs and price transmission in the meat marketing chain: analysis for a German region. Journal of International Food and Agribusiness Marketing, 151(1/2), 7-22.
Reardon, T., and Berdegué, J.A. 2002. The rapid rise of supermarkets in Latin America: challenges and opportunities for development. Development Policy Review, 20(4), 371-388.
Reardon, T., Timmer, P., and Bordegue, J. 2004. The rapid rise of supermarkets in developing countries: induces organizational, institutional, and technological change in agrifood systems. Journal of Agricultural and Development Economics, 1(2), 168-183.
Rao, B.B., and Rao, G. 2005. Are U.S. gasoline price adjustments asymmetric? , Working Paper (pp. 1-9): Department of Economics, The University of South Pacific, Suva.
Reziti, I., and Panagopoulos, Y. 2008. Asymmetric price transmission in the Greek agri-food sector: some tests. Agribusiness, 24(1), 16-30.
Sanjua, A.I., and Gil, J.M. 2001. Price transmission analysis: a flexible methodological approach applied to European pork and lamb markets. Applied Economics, 33, 123-131.
v. Cramon-Taubadel, S., and Loy, J.P. 1996. Price Asymmetry in the international wheat market: comment. Canadian Journal of Agricultural Economics, 44, 311317
von Cramon-Taubadel, S. 1998. Estimating asymmetric price transmission with the error correction representation: an application to the German pork market European Review of Agricultural Economics, 25, 118.
Weatherspoon, D.D., and Reardon, T. 2003. The rise of supermarkets in Africa: implications for agrifood systems and the rural poor. Development Policy Review, 21(3), 333-355.
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
The authors who publis article(s) in Jurnal Ekonomi and Kebijakan Pembangunan have to understand and agree that the copyright of article published is owned by Jurnal ekonomi and Kebijakan pembangunan including to reproduce, distribute and sell this journal to public.