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An Assessment of the Impact of Rice Tariff Policy in Indonesia; A Multi-Market Model Approach

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Author Info

  • Bambang Sayaka

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • Sumaryanto

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • André Croppenstedt

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • Stefania DiGiuseppe

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

Abstract

Rice is of key importance to Indonesia’s national and household level food security. The choice of tariff policy has important implications for consumers and producers with policy makers having to decide between the trade-offs implied for the various stakeholders. In this study we use a multi-market model to assess the impact of hypothetical rice tariff changes on household welfare and other variables of interest to rice policy-makers. A reduction in the rice tariff from 30 to 0% reduces rice supply and wheat demand and stimulates rice demand and soybean supply. Rice imports increase from 0.8 to 2 million tons. Rural households except for the Java-top income group, see incomes fall. In terms of purchasing power all households gain very significantly. Eliminating rice tariffs increases crop diversification and more so in those areas and for those income groups which started off least diversified. It is clear that the higher retail rice price resulting from a 30% ad-valorem tariff rate imposes significant cost on the 90% of Indonesian households, including most of the very poor households, who are net rice buyers. The implied income gains appear relatively modest but do accrue to middle and poorer households especially in Java. On the other hand an increase in the tariff from 30 to 50% eliminates rice imports, reduces soybean output and stimulates wheat demand. Rural households, except for the Java-top income group, see incomes rise although the effect is relatively modest. In terms of purchasing power households are all worse off.

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Bibliographic Info

Paper provided by Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA) in its series Working Papers with number 07-18.

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Length: 23 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:fao:wpaper:0718

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Related research

Keywords: Indonesia; multi-market model; household welfare; rice; tariffs; crop diversification.;

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Cited by:
  1. André Croppenstedt & Lorenzo Giovanni Bellú & Fabrizio Bresciani & Stefania DiGiuseppe, 2007. "Agricultural Policy Impact Analysis with Multi-Market Models: A Primer," Working Papers 07-26, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
  2. Bambang Sayaka & Sumaryanto & Masjidin Siregar & André Croppenstedt & Stefania DiGiuseppe, 2007. "An Assessment of the Impact of Higher Yields for Maize, Soybean and Cassava in Indonesia: A Multi-Market Model Approach," Working Papers 07-25, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).

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