The Trans-Sumatra Toll Road and Economic Geography in Indonesia

50 Pages Posted: 28 Mar 2024

See all articles by Yumin Hu

Yumin Hu

Peking University

Yue Li

World Bank; Asian Infrastructure Investment Bank (AIIB)

Mingzhi Xu

INSE at Peking University

Date Written: February 28, 2024

Abstract

We develop and calibrate a quantitative spatial equilibrium model of Indonesia to analyze the potential impact of the Trans-Sumatra Toll Road project on the country's economy. The estimated aggregate welfare gains vary from 1.33 percent of the country's output if there is only trade in final goods to 3.59 percent if sectoral linkages and trade in intermediates are allowed, and they further increase to 4.15 percent if labor mobility is considered. About 86.5% of gains result from improved product market integration and 13.5% from easier worker migration. Finally, the welfare effect concentrates on Sumatra, whereas the overall national inequality declines.

Keywords: Transport infrastructure, Economic geography, Trade in intermediates, Migration, Indonesia

JEL Classification: R11, R13, F10

Suggested Citation

Hu, Yumin and Li, Yue and Xu, Mingzhi, The Trans-Sumatra Toll Road and Economic Geography in Indonesia (February 28, 2024). Available at SSRN: https://ssrn.com/abstract=4741523 or http://dx.doi.org/10.2139/ssrn.4741523

Yumin Hu (Contact Author)

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Yue Li

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Asian Infrastructure Investment Bank (AIIB) ( email )

Beijing
China

Mingzhi Xu

INSE at Peking University ( email )

Peking University
China
Beijing, Beijing 100871
China

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