Abstract
This study evaluated regional heterogeneity in food consumption patterns across Indonesia. The demand system for strategically important food commodities was estimated for five regions: Sumatera, Java-Bali, Kalimantan, Sulawesi, and Nusa Tenggara-Maluku-Papua (Nusmapua). A two-step budgeting procedure based on the Quadratic Almost Ideal Demand System (QUAIDS) framework was used to estimate the unconditional elasticities of each food item in each regional setting, together with household data from the 2018 national socio-economic survey by Statistics Indonesia. The results showed that elasticities differ significantly across the regions, suggesting that regional heterogeneity needs to be considered when estimating demand structure. The estimated elasticities were used to conduct a welfare impact analysis of a simulated price increase, which showed that disregarding regional heterogeneity can overstate or understate welfare loss caused by price increases.
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