Abstract
PurposeUsing cross-sectional household survey data, this paper aims to determine the impact of food price increases on poverty in Indonesia.Design/methodology/approachThis paper uses the quadratic almost ideal demand system applied to the 2013 Indonesian household survey data. The impact of food price increase on household welfare is calculated using a welfare measure, compensating variation.FindingsThree food groups with the most outstanding price impact on poverty, rice, vegetables and fish, were studied. The 20% increase in the price of each food group causes an increase in the headcount ratio by 1.360 points (rice), 0.737 points (vegetables) and 0.636 points (fish). Maintaining food price stability for these food groups is very important because the more the price increases, the more the impact on poverty. Food price policies in rural areas are also more critical than in urban areas because the impact of food price increases in rural areas is higher.Research limitations/implicationsThis paper does not consider the positive impact of rising food prices on food-producing households.Practical implicationsImplementing appropriate poverty alleviation policies through food policies for main food groups and social protection.Social implicationsPromoting rural development policies and agricultural growth.Originality/valueThis paper contributes to the existing literature by providing empirical results regarding the impact of domestic food prices increase on poverty in Indonesia.
Highlights
Poverty alleviation is the commitment of the Indonesian government as mandated by the National Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah – RPJMN) and as an indicator of global development in the Sustainable Development Goals (SDGs)
Conclusion and policy implications Using household survey data, we use demand analysis to calculate the impact of rising food group prices on household welfare and poverty in Indonesia
The welfare measure used is compensating variation (CV) to calculate the impact of price increases on changes in household consumption
Summary
Poverty alleviation is the commitment of the Indonesian government as mandated by the National Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah – RPJMN) and as an indicator of global development in the Sustainable Development Goals (SDGs). Through the National Statistical Office (BPS – Statistics Indonesia), the announcement of the poverty rate always draws public attention. Efforts to alleviate poverty need to pay attention to the root causes of poverty, including providing basic needs. One of the scourges for increasing poverty is the price increase, especially food prices. Rising food prices increase income for food producers, in this case, farmers, but reduce the purchasing power of food consumers, on the other hand. The food prices increase directly rise household spending on food.
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