World Food Prices and Poverty in Indonesia

21 Pages Posted: 14 Jan 2014

See all articles by Peter G. Warr

Peter G. Warr

Australian National University (ANU) - Crawford School of Public Policy

Arief Anshory Yusuf

Padjadjaran University

Date Written: January 2014

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 multisectoral and multihousehold 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.

Keywords: food prices, general equilibrium modelling, Indonesia, poverty incidence

Suggested Citation

Warr, Peter G. and Yusuf, Arief Anshory, World Food Prices and Poverty in Indonesia (January 2014). Australian Journal of Agricultural and Resource Economics, Vol. 58, Issue 1, pp. 1-21, 2014, Available at SSRN: https://ssrn.com/abstract=2378636 or http://dx.doi.org/10.1111/1467-8489.12015

Peter G. Warr (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Arief Anshory Yusuf

Padjadjaran University

Jl. Dipatiukur 35
Bandung, West Java 40132
Indonesia

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