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Fertilizer Subsidies and Food Self-sufficiency in Indonesia

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  • Peter Warr

    ()
    (Australian National University)

  • Arief Anshory Yusuf

    ()
    (Department of Economics, Padjadjaran University)

Abstract

Indonesia is a net importer of almost all of its staple foods. National self-sufficiency in food, especially the mainstaple, rice, is a core objective of economic policy. Poverty reduction is also a core policy objective. Since the 1970s, Indonesia has used agricultural input subsidies, especially on fertilizer, to stimulate agricultural production, largely in pursuit of its self-sufficiency goals. Recently, it has alsoused output protection, especially in rice, for the same purpose. This paper utilizes a multi-sectoral, multi-household general equilibrium model of the Indonesian economy to study the trade-offs between the goals of self-sufficiency and poverty reduction when two alternative means are used toachieve them: a fertilizer subsidy, on the one hand, and output protection, on the other. It does this by analyzing the aggregate and distributional effects of these two sets of policies and by comparing their effects with non-intervention. The analysis shows that, in terms of its effects on poverty, a fertilizer subsidy can be a more effective instrument for achieving the goal of rice self-sufficiency than final product import restrictions.

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File URL: http://lp3e.fe.unpad.ac.id/wopeds/201309.pdf
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Bibliographic Info

Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 201309.

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Length: 41 pages
Date of creation: May 2013
Date of revision: May 2013
Handle: RePEc:unp:wpaper:201309

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Keywords: Indonesia; Fertilizer subsidies; Food self-sufficiency;

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  1. Peter Warr, 2011. "Food Security vs. Food Self-Sufficiency: The Indonesian Case," Departmental Working Papers 2011-04, The Australian National University, Arndt-Corden Department of Economics.
  2. Warr, Peter G., 2005. "Food policy and poverty in Indonesia: a general equilibrium analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(4), December.
  3. Iwan J. Azis, 2000. "Simulating economy-wide models to capture the transition from financial crisis to social crisis," The Annals of Regional Science, Springer, vol. 34(2), pages 251-278.
  4. François Bourguignon & Anne-Sophie Robilliard & Sherman Robinson, 2003. "Representative versus real households in the macro-economic modeling of inequality," DELTA Working Papers 2003-05, DELTA (Ecole normale supérieure).
  5. Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Papers 9909, Laval - Recherche en Politique Economique.
  6. Peter Warr, 2008. "World food prices and poverty incidence in a food exporting country: a multihousehold general equilibrium analysis for Thailand," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 525-537, November.
  7. Robilliard, Anne-Sophie & Robinson, Sherman, 2005. "The social impact of a WTO agreement in Indonesia," Policy Research Working Paper Series 3747, The World Bank.
  8. George Fane & Peter Warr, 2008. "Agricultural Protection In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 133-150.
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