Farm supply response and government programs on rice in East Java, Indonesia
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Date
1988
Authors
Didik Junaedi Rachbini
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Abstract
Using secondary data (historical records), the study attempted to: (1) provide quantitative estimates of the effects of changes in the price of rice and government incentives on the quantity produced by the rice farmers in East Java; (2) evaluate the impact of technical changes on rice farming; and (3) study the government roles, programs and policies on rice farming.
The empirical analyses on the price of rice variable gave some indications of positive but low response reflected by low elasticity of the area harvested (as well as the yield) with respect to the relative price of rice. Both were found to be very inelastic (0.03 for the area response and 0.06 for the yield response), showing the low responsiveness of farmers in easj Java to price movement.
Since irrigation was primarily concerned in the program of intensification, particularly in the Bimas-Inmas program, this variable showed an indication of positive and high response. The elasticity of this variable varied from 4.56 to 5.16 in the area response and from 6.90 to 11.57 in the yield response.
The effect of input subsidy, especially fertilizer subsidy, was found to be significant but had low response. It is relevant to doubt the efficiency and the effectiveness of this government policy because its elasticity was very low (0.06 to 0.07 in the area response and 0.09 to 0.11 in the yield response). However, this fact still motivated the farmers in East Java to increase their rice production.
Price of fertilizer in the yield response was significantly tested as one of the explanatory variables. Meanwhile, technology variable in the area response was found to be non-significant.
In the area response and in the yield response, the rainfall variable failed to show any positive and significant coefficient. Some improvements in the irrigation system and good weather condition might be the major reason for the non-significance of this variable.