Unity or diversity? On the integration and efficiency of rice markets in Indonesia, c. 1920-2006

The emergence of an integrated national economy in Indonesia has been a slow and ongoing evolutionary process. Using rice price series for a number of cities across the Indonesian archipelago, this paper provides quantitative evidence to track this process for the specific case of the rice market. It shows that during Indonesia's colonial period rice markets were relatively well integrated and functioned efficiently. However, the Second World War and the subsequent struggle for independence resulted in disintegrated and inefficient markets. It is only since the late 1970s that markets in Indonesia have returned to a situation in which we can speak about a national integrated economy with well-functioning markets.