World Food Prices and Poverty in Indonesia

Peter Warr and Arief Yusuf

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

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.

Keywords: Indonesia; food prices; poverty incidence; general equilibrium modeling. (search for similar items in EconPapers)
JEL-codes: D58 F14 I32 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2013
New Economics Papers: this item is included in nep-agr, nep-dev and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: World food prices and poverty in Indonesia (2014)
Journal Article: World food prices and poverty in Indonesia (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2013-07

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