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Long-term impacts of global food crisis on production decisions : evidence from farm investments in Indonesia

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  • Nose, Manabu
  • Yamauchi, Futoshi

Abstract

Did the rise in food prices have a long-term impact on agricultural production? Using household-level panel data from seven provinces of Indonesia, this paper finds that the price shock created a forward-looking incentive to invest, which can dynamically enhance productivity in agriculture. It also finds that the impact of the price shock on investment behavior differs by initial wealth. In response to price increases, wealthy farmers invested more in productive assets, while poor farmers increased their financial savings as well as consumption. Price spikes relax liquidity constraints, which increases investments among the richer while do so savings and consumptions among the poor, possibly leading to diverging income inequality in the long run.

Suggested Citation

  • Nose, Manabu & Yamauchi, Futoshi, 2012. "Long-term impacts of global food crisis on production decisions : evidence from farm investments in Indonesia," Policy Research Working Paper Series 6065, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6065
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    Cited by:

    1. Miyazaki, Suguru & Shimamura, Yasuharu, 2014. "Risk, Infrastructure, and Rural Market Integration: Implications of Infrastructure Provision for Food Markets and Household Consumption in Rural Indonesia," Working Papers 81, JICA Research Institute.

    More about this item

    Keywords

    Markets and Market Access; Emerging Markets; Economic Theory&Research; Food&Beverage Industry; Regional Economic Development;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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