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World Food Prices and Poverty in Indonesia

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  • Peter Warr
  • Arief Anshory Yusuf

Abstract

Spikes in international food prices in 2007-2008 worsened poverty incidence in Indonesia, both rural and urban, but only by small amounts. The paper reaches this conclusion using a multi-sectoral and multi-household general equilibrium model of the Indonesian economy. The negative effect on poor consumers, operating through their living costs, outweighed the positive effect on poor farmers, operating through their incomes. Indonesia’s post-2004 rice import restrictions shielded its internal rice market from the temporary world price increases, muting the increase in poverty. But it did this only by imposing large and permanent increases in both domestic rice prices and poverty incidence. Poverty incidence increased more among rural than urban people, even though higher agricultural prices mean higher incomes for many of the rural poor. Gains to poor farmers were outweighed by the losses incurred by the large number of rural poor who are net buyers of food and the fact that food represents a large share of their total budgets, even larger on average than for the urban poor. The main beneficiaries of higher food prices are not the rural poor, but the owners of agricultural land and capital, many of whom are urban based.

Suggested Citation

  • Peter Warr & Arief Anshory Yusuf, 2013. "World Food Prices and Poverty in Indonesia," Departmental Working Papers 2013-07, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2013-07
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2013/wp_econ_2013_07.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Aswicahyono, Haryo & Narjok, Dionisius, 2011. "Indonesian Industrialization," WIDER Working Paper Series 053, World Institute for Development Economic Research (UNU-WIDER).
    3. 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.
    4. Jed Friedman & James Levinsohn, 2002. "The Distributional Impacts of Indonesia's Financial Crisis on Household Welfare: A "Rapid Response" Methodology," World Bank Economic Review, World Bank Group, vol. 16(3), pages 397-423, December.
    5. George Fane & Peter Warr, 2008. "Agricultural Protection In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 133-150.
    6. Peter Warr & Arief Anshory Yusuf, 2011. "Reducing Indonesia’s deforestation‐based greenhouse gas emissions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(3), pages 297-321, July.
    7. 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.
    8. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
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    Citations

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    Cited by:

    1. Peter Warr, 2014. "Food insecurity and its determinants," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(4), pages 519-537, October.
    2. Peter Warr & Arief Anshory Yusuf, 2014. "Fertilizer subsidies and food self-sufficiency in Indonesia," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 571-588, September.
    3. Raymond B. Frempong & David Stadelmann, 2017. "The Effect of Food Price Changes on Child Labor: Evidence from Uganda," CREMA Working Paper Series 2017-06, Center for Research in Economics, Management and the Arts (CREMA).
    4. Mahadevan, Renuka & Nugroho, Anda & Amir, Hidayat, 2017. "Do inward looking trade policies affect poverty and income inequality? Evidence from Indonesia's recent wave of rising protectionism," Economic Modelling, Elsevier, vol. 62(C), pages 23-34.
    5. Dawe, David & Maltsoglou, Irini, 2014. "Marketing margins and the welfare analysis of food price shocks," Food Policy, Elsevier, vol. 46(C), pages 50-55.

    More about this item

    Keywords

    Indonesia; food prices; poverty incidence; general equilibrium modeling.;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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