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The dynamics of strategically important food preference in Indonesia: An empirical evaluation of consumption pattern and welfare loss

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  • Hamzah, Ibnu Nur
  • Huang, Wei

Abstract

This study evaluated regional heterogeneity in food consumption patterns across Indonesia. The demand system for strategically important food commodities was estimated for five regions: Sumatera, Java-Bali, Kalimantan, Sulawesi, and Nusa Tenggara-Maluku-Papua (Nusmapua). A two-step budgeting procedure based on the Quadratic Almost Ideal Demand System (QUAIDS) framework was used to estimate the unconditional elasticities of each food item in each regional setting, together with household data from the 2018 national socio-economic survey by Statistics Indonesia. The results showed that elasticities differ significantly across the regions, suggesting that regional heterogeneity needs to be considered when estimating demand structure. The estimated elasticities were used to conduct a welfare impact analysis of a simulated price increase, which showed that disregarding regional heterogeneity can overstate or understate welfare loss caused by price increases.

Suggested Citation

  • Hamzah, Ibnu Nur & Huang, Wei, 2023. "The dynamics of strategically important food preference in Indonesia: An empirical evaluation of consumption pattern and welfare loss," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 435-449.
    • Handle: RePEc:eee:ecanpo:v:79:y:2023:i:c:p:435-449
    DOI: 10.1016/j.eap.2023.06.024
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    More about this item

    Keywords

    QUAIDS; Strategic food; Demand elasticity; Regional heterogeneity; Indonesia;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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