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Food policy and poverty in Indonesia: a general equilibrium analysis

Rice is Indonesia's staple food and accounts for large shares of both consumers' budgets and total employment. Until recently, Indonesia was the world's largest importer, but rice import policy is now highly protectionist. Since early 2004, rice imports have been officially banned. Advocates of this policy say it reduces poverty by assisting poor farmers. Opponents say it increases poverty, stressing negative effects on poor consumers. This paper uses a general equilibrium model of the Indonesian economy to analyse the effects of a ban on rice imports. The analysis recognises 1000 individual households, including all major socioeconomic categories, disaggregated by expenditures per person. It takes account of effects on each household's real expenditure and its income, operating through wages and returns to land and capital. The results indicate that the rice import ban raises the domestic price of rice relative to the import price by an amount equivalent to a 125 per cent tariff, six times the pre-2004 tariff. Poverty incidence rises by a little under 1 per cent of the population and increases in both rural and urban areas. Among farmers, only the richest gain. These results are qualitatively robust to variations in key parametric assumptions. Copyright 2005 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd..

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Article provided by Australian Agricultural and Resource Economics Society in its journal The Australian Journal of Agricultural and Resource Economics.

Volume (Year): 49 (2005)
Issue (Month): 4 (December)
Pages: 429-451

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Handle: RePEc:bla:ajarec:v:49:y:2005:i:4:p:429-451
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  1. Peter G. Warr, 2001. "Welfare Effects of an Export Tax: Thailand's Rice Premium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 903-920.
  2. Peter Warr, 2005. "Food Policy And Poverty In Indonesia: A General Equilibrium Analysis," Departmental Working Papers 2005-03, The Australian National University, Arndt-Corden Department of Economics.
  3. Fane, George & Warr, Peter G., 2002. "How Economic Growth Reduces Poverty: A General Equilibrium Analysis for Indonesia," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Peter Warr, 2008. "The transmission of import prices to domestic prices: an application to Indonesia," Applied Economics Letters, Taylor & Francis Journals, vol. 15(7), pages 499-503.
  5. Codsi, George & Pearson, K R & Wilcoxen, Peter J, 1992. "General-Purpose Software for Intertemporal Economic Models," Computer Science in Economics & Management, Society for Computational Economics, vol. 5(1), pages 57-79, February.
  6. repec:cup:cbooks:9780521594127 is not listed on IDEAS
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