Food policy and poverty in Indonesia: a general equilibrium analysis

Rice is Indonesia’s staple food and accounts for large shares of both consumers’ budgets and total employment. Until recently, Indonesia was the world’s largest importer, but rice import policy is now highly protectionist. Since early 2004, rice imports have been officially banned. Advocates of this policy say it reduces poverty by assisting poor farmers. Opponents say it increases poverty, stressing negative effects on poor consumers. This paper uses a general equilibrium model of the Indonesian economy to analyse the effects of a ban on rice imports. The analysis recognises 1000 individual households, including allmajor socioeconomic categories, disaggregated by expenditures per person. It takes account of effects on each household’s real expenditure and its income, operating through wages and returns to land and capital. The results indicate that the rice import ban raises the domestic price of rice relative to the import price by an amount equivalent to a 125 per cent tariff, six times the pre-2004 tariff. Poverty incidence rises by a little under 1 per cent of the population and increases in both rural and urban areas. Among farmers, only the richest gain. These results are qualitatively robust to variations in key parametric assumptions.general equilibrium, rice imports, trade policy, Indonesia, Agricultural and Food Policy, Food Security and Poverty,

THE ECONOMICS OF SHADOW PRICING: MARKET DISTORTIONS AND PUBLIC INVESTMENT

This paper explores the background to an important issue in applied welfare economics -- how the commodities used and produced by public projects should be valued in choosing among alternative modes of production.Public Economics,

SHADOW PRICING AND CHOICE OF TECHNIQUE: AN APPLICATION TO INDONESIAN RICE MILLING

This paper attempts to explore the implications of shadow pricing for the evaluation of four investment alternatives recently faced by the government of Indonesia. The shadow pricing procedure adopted involves a welfare accounting exercise which attempts to estimate the social benefits and costs of public production or use of commodities in the presence of market distortions.Crop Production/Industries,

Road Improvement and Poverty Reduction in Laos

Laos is a mountainous country with poor roads and a high rate of poverty incidence, especially in rural areas. It is obvious that better roads could reduce poverty, but by how much? And what forms of road improvement reduce poverty the most? The economic effects of road improvement are complex and multi-channeled. This paper uses a multi-household general equilibrium modeling approach to study these issues. The results indicate that road improvement does reduce poverty but that the quantitative impact depends heavily on the types of road that are provided and the areas in which the road is located.General equilibrium modelling, infrastructure, poverty, Southeast Asia., Food Security and Poverty, Public Economics,

Agricultural Trade Reform and Poverty in Thailand: A General Equilibrium Analysis

A general equilibrium modeling approach is used to estimate the effects within Thailand of unilateral and global trade liberalization, including effects on poverty incidence. It is concluded that across the board trade liberalization is poverty-reducing within Thailand, whether other countries participate in the liberalization or not. This poverty reduction occurs among both farm and non-farm households and this qualitative outcome is not dependent on the particular poverty line used in the analysis. Liberalization in agricultural products alone raises poverty incidence among farm households, while reducing it slightly among non-farm households.Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

Poverty Incidence and Sectoral Growth: Evidence from Southeast Asia

Poverty incidence, Economic growth, Rural poverty, Urban poverty

Agriculture's decline in Indonesia : supply or demand determined

Agriculture's share in an economy invariably declines as per capita income rises and as the economy develops. The literature on its causes has focused on the relative price effects arising from demand factors--especially Engel's Law (that the proportion of income spent on food declines as incomes rise)--rather than on such supply-side influences as changes in relative factor endowments and different rates of technical change. Engel's Law is convincing at the global level but it does not explain why agriculture's share should decline sharply in small open economies that experience rapid economic growth. A simple structural model of the transformation of the Indonesian economy, applying the Error Correction Mechanism to capture the dynamics resulting from disequilibria and costs of adjustment is developed. The authors develop an econometric model of the economy's supply side so they can explain agriculture's decline by the three theoretical factors: relative price changes, technical change, and factor accumulation. Based on the model's results, the authors conclude that the decline in the relative price of agricultural output contributed relatively little to the decline in agriculture's share. Technical change actually had a positive effect on agriculture's share, retarding the pressures for a decline in its share over time. By far the most important influence appears to have been the rapid accumulation of capital relative to labor over the period studied (1960-87).Economic Theory&Research,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Economic Growth,Inequality

Distortions to Agricultural Incentives in Indonesia

Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

How Economic Growth Reduces Poverty: A General Equilibrium Analysis for Indonesia

Poverty, Inequality, Growth, Indonesia

Agricultural Protection in a Food Importing Country: Indonesia

This paper summarizes two country-specific studies which examine the degree and changing patterns of incentives to domestic agriculture in Malaysia and Vietnam. Malaysia stands out in the developing world for its long-standing commitment to maintaining a relatively open trade and investment policy regime. However excessive assistance given to paddy farmers remains a major distortion in agricultural incentives. Market oriented reforms in Vietnam began in the late 1990 with attempts to unshackle domestic agriculture, and reforms in this areas have been wide-ranging, with the exception of excessive assistance provided to sugar cane producers. The impressive reform outcome in agriculture has played a pivotal role in sustaining the momentum of reforms, assuring the continuation of market-oriented reforms. However, remain a major anomaly in the incentive structure.International Relations/Trade,