WELFARE IMPACT OF HIGH-NUTRIENT FOOD PRICE INCREASE ON INDONESIAN HOUSEHOLDS: IS THERE ROLE FROM OWN-FARM PRODUCTION?

Abstract

Introduction/Main Objectives: Significant price increases of food commodities and uncertainty in the market probably have a severe impact on society and especially on the low-income households in it. Background Problems: The increases in food price could have a large impact on the economy and specifically on that of households. Thus, the study was conducted to investigate what the demand for food specifically high-nutrient food and the impact on welfare are like in Indonesian households when food prices rise. Novelty: There were bulk of empirical researches on the impact of food price changes on household welfare, however the study focused on high-nutrient commodities in particular on the self-produced food was still limited. many of the previous studies used cross-section data for one period but this study used two-wave longitudinal data Research Methods: Using large sample data from Indonesian Family Life Survey (IFLS), the study employed the Quadratic Almost Ideal Demand System (QUAIDS) to identify the demand pattern and applied Compensating Variation (CV) to understand the impact of soaring food price on welfare change Finding/Results: Overall, The analysis of welfare impact notes that when the price increases, all household groups would experience welfare loss. The poorest household would be lower in level of experiencing welfare loss than the richest household while more welfare loss is suffered by households that live in Java and rural areas. Conclusion: For the low-income households, having their own productive farm could overcome an economic shock threatening them. Thus, the government should support small-scale farming through such strategic policies as giving them input assistance and training in how to manage a small farm.m.