Is cheap fuel policy a (short-term) remedy for costly transportation in rural Indonesia?

This study evaluates the impact of Indonesia's One Price Fuel (BBM Satu Harga) policy on domestic transport costs in rural areas. Using a Difference in Difference (DD) regression model with data from 58 intervened subdistricts (2014–2018), the analysis incorporates control variables, village fixed effects, and propensity score matching. Results show the policy reduced average domestic transport costs by approximately 65%, but only had a significant effect in frontier, outermost, and underdeveloped (3T) villages. The study also finds that improving transportation infrastructure such as asphalt roads and public transport provision are effective alternative policy options.