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

Manabu Nose and Futoshi Yamauchi

No 6065, Policy Research Working Paper Series from The World Bank

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.

Keywords: Markets and Market Access; Emerging Markets; Economic Theory&Research; Food&Beverage Industry; Regional Economic Development (search for similar items in EconPapers)
Date: 2012-05-01
New Economics Papers: this item is included in nep-agr and nep-sea
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Long-term Impacts of Global Food Crisis on Production Decisions: Evidence from Farm Investments in Indonesia (2016)
Working Paper: Long-term Impacts of Global Food Crisis on Production Decisions: Evidence from Farm Investments in Indonesia (2013)
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