The Impact Of Trade Costs In Indonesian Agri-Food Sectors: An Interregional Cge Analysis

Indonesia is a Developing Country (DC) where more than 13 percent of her population live below the poverty line and approximately half of all households are near the national poverty line. While at the national level, Indonesia has sufficient food production to be self supporting, not all regions have the same endowment of agricultural productive capacity which can result in regional shortages. This study examines the extent to which a reduction in Indonesia‟s trade and transport margins can reduce interregional agri-food prices and thus help improve food security. As few studies explore the impact of intra-national trade barriers; this paper makes a unique contribution to this small, but important literature. Findings suggest that reducing trade margin or “soft infrastructure” margins is the more effective approach to improving economic outcomes across Indonesia‟s regions. Further, while reducing trade margins improved the poverty incidence for residence in all regions, the primary beneficiaries of this investment were those that live in urban areas. Results will be of interest to those interested in supporting the welfare of individuals in developing countries, and particularly living in island nations.