IS INPUT SUBSIDY STILL USEFUL FOR INDONESIAN AGRICULTURE?

An empirical review of rice productivity at the household level

  • Gilang Wirakusuma Universitas Gadjah Mada
DOI: https://doi.org/10.14203/JEP.28.1.2020.17-28
Keywords: productivity, Propensity Score Matching, rice farm households, input subsidy

Abstract

Government policies in the form of input subsidies have become an essential instrument for improving the performance of the agricultural sector and overcoming the limitations of resources owned by farmers. However, there are still questions about how effective this policy can be in boosting agricultural performance. This study aims to examine the impact of channeling input subsidies on agricultural productivity. Using the 2014 Agricultural Census microdata, 26,079 rice farm households were included in the analysis. Propensity Score Matching (PSM) is used to examine the impact of input subsidies on agricultural productivity represented by the productivity of rice farming. PSM was chosen because it can overcome the selection bias that could potentially arise in the analysis process. The analysis showed that the PSM model succeeded in reducing bias and confirmed that input subsidies had a significant effect on the productivity of rice farming. Thus, the input subsidy policy is an important and relevant instructor to improve the performance of the agricultural sector.

Downloads

Download data is not yet available.

References

Alston, J. M., & James, J. S. (2002). The incidence of agricultural policy. Handbook of Agricultural Economics, 2, 1689–1749.

Bach, S., Kohlhaas, M., Meyer, B., Praetorius, B., & Welsch, H. (2002). The effects of environmental fiscal reform in Germany: A simulation study. Energy Policy, 30(9), 803–811.

Badan Pusat Statistik. (2015). Statistik Indonesia 2014. Jakarta: Badan Pusat Statistik.

Bappenas. (2014). Analisis Rumah Tangga, Lahan, dan Usaha Pertanian di Indonesia : Sensus Pertanian 2013. Jakarta, Indonesia: Badan Perencanaan Pembangunan Nasional.

Blancard, S., Boussemart, J. P., Briec, W., & Kerstens, K. (2006). Short- and long-run credit con- straints in French agriculture: A directional distance function framework using expenditure- constrained profit functions. American Journal of Agricultural Economics, 88, 351–364.

Caliendo, M., Caliendo, M., & Kopeinig, S. (2005). Some Practical Guidance for the Implementation of Propensity Score Matching. IZA Discussion Paper, (1588).

Chirwa, E., & Dorward, A. (2014). Strategic issues in the farm input subsidy programme. Paper Prepared for Ministry of Agriculture and Food Security, Malawi, and DFID. SOAS, University of London, London.

Chirwa, E., Matita, M., & Dorward, A. (2011). Factors Influencing Access to Agricultural Input Subsidy Coupons in Malawi. Future Agriculture Working Paper.

Ciaian, P., & Swinnen, J. F. M. (2009). Credit market imperfections and the distribution of policy rents. American Journal OfAgricultural Economics, 91, 1,124-1,139.

Cui, L., Wu, K. J., & Tseng, M. L. (2016). Exploring a novel agricultural subsidy model with sustainable development: A Chinese agribusiness in Liaoning Province. Sustainability, 9(1).

De Moor, A. P. G., & Calamai, P. (1997). Subsidizing Unsustainable Development: Undermining the Earth with Public Funds. The Earth Council, San Jose, Costa Rica.

Druilhe, Z., & Barreiro-Hurlé, J. (2012). Fertilizer subsidies in sub-Saharan Africa. ESA Working Paper, No. 12-04.

Fan, S., Gulati, A., & Thorat, S. (2008). Investment, subsidies, and pro-poor growth in rural India. Agricultural Economics, 39, 163–170.

Filipski, M., & Taylor, J. E. (2011). A simulation impact evaluation of rural income transfers in Malawi and Ghana. Prepared for UNICEF-ESARO and Participants at the Workshop “Methodological Issues in Evaluating the Impact of Social Cash Transfers in Sub Saharan Africa”, Naivasha, Kenya, January 19-21, 2011, 38.

Heckman, J. J., & Leamer, E. E. (2007). Handbook of Econometrics Vol. 6. North Holland: Elsevier.

Henningsen, A., Kumbhakar, S., & Lien, G. (2009). Econometric Analysis ofthe Effects ofSubsidies on Farm Production in Case ofEndogenous Input Quantities. Agricultural and Applied Economics Association: Milwaukee, WI, USA.

Juniarsih, Tenriawaru, A. N., & Sirajuddin, S. N. (2013). Peningkatan produksi dan pendapatan petani di Propinsi Sulawesi Selatan. Retrieved from http://pasca.unhas.ac.id/jurnal/files/f03546fb4a7d6e0a805177ebc5906277.pdf

Kaur, R., & Sharma, M. (2012). Agricultural subsidies in India. Boon or curse. IOSR Journal of Humanity and Social Science, 2, 40–46.
Kementerian Keuangan. (2019). Alokasi Anggaran Kedaulatan Pangan. Retrieved from http://www.data-apbn.kemenkeu.go.id/Dataset/Details/1015

Kirwan, B. (2009). The incidence of U.S. agricultural subsidies on farmland rental rates. Jounal of Political Economics, 117, 138–164.

Koo, W., & Kennedy, P. L. (2006). The impact of agricultural subsidies on global welfare. American Journal of Agricultural Economics, 88, 1219–1226.

Kumbhakar, S., & Bokusheva, R. (2009). Modelling farm production decisions under an expenditure constraint. European Review of Agricultural Economics, 36, 343–367.

Malan, M., Berkhout, E., & Bouma, J. (2016). The impact of taxes and subsidies on crop yields Agricultural price distortions in Africa. PBL Netherlands Environmental Assessment Agency, The Hague.

Mantau, Z., Hanani, N., Mustadjab, M. M., & Syafrial. (2019). The impact of subsidy policy for competitiveness of paddy farming in Gorontalo Province , Indonesia. Agricultural Socio-Economics Journal, XIX(1), 27–32.

McCulloch, N. (2008). Rice prices and poverty in Indonesia. Bulletin of Indonesian Economic Studies, 44(1), 45–63. https://doi.org/10.1080/00074910802001579

Mulyadiana, A. T., Marwanti, S., & Rahayu, W. (2018). Analysis of the effectiveness of fertilizer subsidy policy and its effect on rice production in Karanganyar Regency Analysis of the effectiveness of fertilizer subsidy policy and its effect on rice production in Karanganyar Regency. IOP Conf. Ser.: Earth Environ. Sci., 142 012047.

Nasrin, M., & Bauer, S. (2018). Assessing the impact of fertilizer subsidy on farming efficiency : A case of Bangladeshi farmers. Open Agriculture, 3, 567–577.

Nindi, T. C. (2015). Effects of the Farm Input Subsidy Program on Maize: Identifying Maize Supply and Demand Elasticities in Malawi. Mississippi State University: Starkville, MS, USA.

Ramli, N. N., Shamsudin, M. N., Mohamed, Z., & Radam, A. (2012). The Impact of Fertilizer Subsidy on Malaysia Paddy / Rice Industry Using a System Dynamics Approach. International Journal of Social Science and Humanity, 2(3), 213–219.

Ricker-gilbert, J., & Jayne, T. S. (2011). What are the Enduring Effects of Fertilizer Subsidy Programs on Recipient Farm Households? Evidence from Malawi. Staff Paper, (Department of Agricultural, Food and Resource Economics, Michigan State University).

Ricker-Gilbert, J., Jayne, T., & Shively, G. (2012). Addressing the ‘Wicked Problem’ ofInput Subsidy Programs in Africa: A Review. American Agricutural Economists Association: Seattle, WA, USA.

Rizov, M., Pokrivcak, J., & Ciaian, P. (2013). CAP Subsidies and Productivity of the EU Farms. Journal of Agricultural Economics, 64(3), 537–557. https://doi.org/10.1111/1477-9552.12030

Rosenbaum, P. R., & Rubin, D. B. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70, 41–50.

Rusliyadi, M., Jamil, A. B. H. M., Othman, M., & Kumalasari, R. T. (2018). Agricultural extension policy , agricultural growth and poverty reduction in Indonesia. International Journal of Engineering & Technology, 7(4), 5539–5550. https://doi.org/10.14419/ijet.v7i4.13337

Salunkhe, H. A., & Deshmush, B. B. (2012). The over view of Government subsidies in agriculture sector in India. Journal of Agriculture and Veterinary Science, 1, 43–47.

Shively, G. E., & Ricker-Gilbert, J. (2013). Measuring the Impacts of Agricultural Input Subsidies in Sub-Saharan Africa: Evidence from Malawi’s Farm Input Subsidy Program. Purdue Policy Res. Inst. (Ppri) Policy Briefs, 1(4).

Susilastuti, D. (2018). Agricultural production and its implications on economic growth and poverty reduction. European Research Studies Journal, 21(1), 309–320.

World Bank. (2008). Subsidies as an Instrument in Agricultural Finance: A Review. World Bank: Washington, DC, USA.

WTO. (2001). The Doha Round; WTO: Geneva, Switzerland Available online: https://www.wto.org/english/ tratop_e/dda_e/dda_e.htm.
Published
2020-06-30
How to Cite
Wirakusuma, Gilang. 2020. “IS INPUT SUBSIDY STILL USEFUL FOR INDONESIAN AGRICULTURE? ”. Jurnal Ekonomi Dan Pembangunan 28 (1), 17-28. https://doi.org/10.14203/JEP.28.1.2020.17-28.
Issue
Vol. 28 No. 1 (2020)
Section
Article

Copyright (c) 2020 Jurnal Ekonomi dan Pembangunan

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Terms and Conditions of Publication


1. Author's Rights and Authorities

As an author, you (or your employer or institution) may do the following:

  • make copies (print or electronic) of the article for your own personal use (not for commercial purpose), including for your own classroom teaching use;

  • make copies and distribute such copies (including through email) of the article to research colleagues, but not allowed to distribute commercially and systematically, e.g. via an email list or list server;

  • present the article at a meeting or conference and to distribute copies of the article to the delegates attending such meeting;

  • retain all proprietary rights in any process, procedure, or article of manufacture described in the work;

  • include the article in full or in part in a thesis or dissertation;

  • use the article or any part thereof in a printed compilation of your works, such as collected writings or lecture notes, and other derivative works, with full acknowledgement to JEP as the original journal publishing the article;

  • may reproduce material extracted from the article or derivative works for the author's personal use, but must consider the copyrights procedure.

All copies, print or electronic, or other use of the paper or article must include the appropriate bibliographic citation for the article’s publication in the journal.

 

2. Requests from Third Parties

Although authors are permitted to re-use all or portions of the article in other works, this does not include granting third-party requests for reprinting, republishing, or other types of re-use. Requests for all uses not included above, including the authorization of third parties to reproduce or otherwise use all or part of the article (including figures and tables), should be referred to P2E-LIPI by going to our website at http://ekonomi.lipi.go.id/.

 

3. P2E LIPI Copyright Ownership

Economic Research Center, the Indonesian Institute of Sciences (P2E-LIPI) owns the copyrights to reproduce, distribute, disseminate, translate, and other uses in accordance with the existing Laws and Regulations.

 

Every accepted manuscript should be accompanied by "Copyright Transfer Agreement" prior to the article publication.


Lisensi Creative Commons
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

 

JEP Journal by P2E-LIPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. Permissions beyond the scope of this license may be available at http://jurnalekonomi.lipi.go.id/index.php/JEP

If you are a nonprofit or charitable organization, your use of an NC-licensed work could still run afoul of the NC restriction, and if you are a for-profit entity, your use of an NC-licensed work does not necessarily mean you have violated the term.