Abstract
This research aims to analyze the effect of fertilizer subsidies on the production and household income of rice farming in Indonesia using the 2017 crops business cost structure survey data. Utilizing the Ordinary Least Square (OLS) method, this research shows that rice farming households that received fertilizer subsidies have higher production and income than households that did not receive subsidies. Simultaneously, in the Two-Stage Least Square (TSLS) method, the usage of the ownership status of a household residential building as an instrument for the fertilizer subsidy variable is considered inaccurate so that it cannot answer the research objectives.
Highlights
The development of the agricultural sector is essentially aimed at improving the welfare of farmers and ensuring the achievement of food security and even food sovereignty, for every Indonesian citizen
Risks arising from increased fluctuations in international gas prices and the volatility of the Rupiah exchange rate against the US Dollar prompted an increase in the number of subsidies, which exacerbated pressure on state finances (Ministry of Finance, 2015)
This study aims to analyze the effect of fertilizer subsidies on the production and income of rice farming households in Indonesia
Summary
The development of the agricultural sector is essentially aimed at improving the welfare of farmers and ensuring the achievement of food security and even food sovereignty, for every Indonesian citizen. As an effort to achieve it, the government intervened by providing fertilizer subsidies to farmers. The budget allocation for fertilizer subsidies is quite large. It is around 20 to nearly 40 percent of the total food security budget for 2010-2019. The realization of the distribution of fertilizer subsidies itself continues to increase from IDR 18.4 trillion in 2010 to IDR 34.3 trillion in 2019 (Directorate General of Budget, Ministry of Finance, 2020). This policy is considered to be increasingly burdensome to state finances. Risks arising from increased fluctuations in international gas prices and the volatility of the Rupiah exchange rate against the US Dollar prompted an increase in the number of subsidies, which exacerbated pressure on state finances (Ministry of Finance, 2015)
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