The Impact of Government Expenditure on Agriculture Marketing and Supply Chain Management: An Application of Two-Stage Least Approaches

Abstract

The purpose of this quantitative study is to investigate the role of government expenditure on food security and its model based on the Input Demand Function (IDF). This study uses secondary data collected from the Bureau of Statistics Centre of Indonesia, which consists of 23 regencies/municipalities in Aceh Province for the 2007-2016 period. The data is analysed using Two-Stage Least Square (2SLS). The analysis shows that food security in terms of availability, accessibility, and food utilisation was influenced by the farmers’ decisions regarding production inputs. In order to increase food availability, the government is partially responsible for the costs incurred by farmers for producing food. Furthermore, to raise food accessibility, utilisation, and farmers’ income, food prices need to be regulated such as the price of grain for farmers or the price of rice for producers. To conclude, the government needs to buffer the stock board and ensure controls are in place to stabilise food prices.