The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/2515-964X.htm

JABES
30,2 Impact of food price increases on
poverty in Indonesia: empirical
evidence from cross-sectional data
126 Faharuddin Faharuddin
Badan Pusat Statistik Republik Indonesia, Jakarta, Indonesia, and
Received 7 June 2021
Revised 6 September 2021 M. Yamin, Andy Mulyana and Y. Yunita
22 November 2021
24 December 2021
Faculty of Agriculture, Sriwijaya University, Palembang, Indonesia
Accepted 24 December 2021
Abstract
Purpose – Using cross-sectional household survey data, this paper aims to determine the impact of food price
increases on poverty in Indonesia.
Design/methodology/approach – This paper uses the quadratic almost ideal demand system applied to the
2013 Indonesian household survey data. The impact of food price increase on household welfare is calculated
using a welfare measure, compensating variation.
Findings – Three food groups with the most outstanding price impact on poverty, rice, vegetables and fish,
were studied. The 20% increase in the price of each food group causes an increase in the headcount ratio by
1.360 points (rice), 0.737 points (vegetables) and 0.636 points (fish). Maintaining food price stability for these
food groups is very important because the more the price increases, the more the impact on poverty. Food price
policies in rural areas are also more critical than in urban areas because the impact of food price increases in
rural areas is higher.
Research limitations/implications – This paper does not consider the positive impact of rising food prices
on food-producing households.
Practical implications – Implementing appropriate poverty alleviation policies through food policies for
main food groups and social protection.
Social implications – Promoting rural development policies and agricultural growth.
Originality/value – This paper contributes to the existing literature by providing empirical results regarding
the impact of domestic food prices increase on poverty in Indonesia.
Keywords Food price increase, Poverty, Indonesia, QUAIDS, Compensating variation
Paper type Research paper

1. Introduction
Poverty alleviation is the commitment of the Indonesian government as mandated by the
National Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah –
RPJMN) and as an indicator of global development in the Sustainable Development Goals
(SDGs). Therefore, through the National Statistical Office (BPS – Statistics Indonesia), the
announcement of the poverty rate always draws public attention. Efforts to alleviate poverty
need to pay attention to the root causes of poverty, including providing basic needs.
One of the scourges for increasing poverty is the price increase, especially food prices.
Rising food prices increase income for food producers, in this case, farmers, but reduce the
purchasing power of food consumers, on the other hand. For consumers, the food prices
increase directly rise household spending on food. If household income remains unchanged, a

JEL Classification — Q12, Q17, Q18, I32

© Faharuddin Faharuddin, M. Yamin, Andy Mulyana and Y. Yunita. Published in Journal of Asian
Journal of Asian Business and Business and Economic Studies. Published by Emerald Publishing Limited. This article is published
Economic Studies under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute,
Vol. 30 No. 2, 2023
pp. 126-142 translate and create derivative works of this article (for both commercial and non-commercial purposes),
Emerald Publishing Limited subject to full attribution to the original publication and authors. The full terms of this licence may be
2515-964X
DOI 10.1108/JABES-06-2021-0066 seen at http://creativecommons.org/licences/by/4.0/legalcode
rise in food prices decreases purchasing power and increases poverty. During the 1997–1999 Impact of food
crisis period, for example, a high price increase contributed to the high poverty incidence in price increases
Indonesia in the short run. However, the foodstuffs inflation rate in Indonesia in recent years
was relatively lower. Therefore, in March 2019, the Indonesian poverty rate was 9.41% and
had consistently declined since 2006 (BPS, 2019). Despite the decline, the poverty rate in
Indonesia is still much higher than in neighboring countries such as Malaysia and Thailand
(World Bank, 2020). With the above empirical fact between the increase in food inflation and
poverty, it is necessary to examine the negative impact of food price increases on poverty. It 127
will be helpful for government policy responses, such as price policy, food aid policy or food
export and import policy.
Recent studies on household response to food prices increase in Indonesia at the micro-
level have been carried out by Pangaribowo and Tsegai (2011), Widarjono (2012), Faharuddin
et al. (2017, 2019), Allo et al. (2018), Devi and Purnomosidi (2019) and Khoiriyah et al. (2020).
Unfortunately, these studies only calculate the expenditure/income elasticity and price
elasticity to identify the characteristics of each food group. Besides calculating price and
income elasticity, some of them also calculated the price impact on household welfare using a
compensating variation (CV). They had proposed policy recommendations, but they did not
specifically address the rising food price’s impact on poverty.
There has been little recent research into the relationship between rising food prices and
poverty in Indonesia. From international literature, we found McCulloch (2008), Ivanic et al.
(2012), Warr and Yusuf (2013) and Misdawita et al. (2019). McCulloch (2008) and Ivanic et al.
(2012) studied increasing rice price impact on poverty in Indonesia, while Warr and Yusuf
(2013) use international prices for six food commodities to calculate the poverty impact.
Misdawita et al. (2019) used the social accounting matrix to find the effect of four food
commodities prices (rice, maize, soybean and sugar) on poverty. Most households in
Indonesia, including rural areas, are negatively affected by the increase in rice prices because
of decreasing household welfare and increasing poverty. Although these studies were
necessary for the government policy responses, it is better to expand them to the impact of
other food group prices rather than primary food commodities, rice, maize, soybean or sugar.
This paper aims to examine the impact of food prices’ increase on poverty in Indonesia
using cross-sectional household survey data. We calculate the food price impact using a
welfare measure (CV) based on simulations of food prices increase. Applying the Foster–
Greer–Thorbeck (FGT) poverty index on household CV-reduced expenditure, we will get the
poverty rate after the price’s increase. The poverty impact is the changes in the FGT poverty
index before and after the price increase. Our main contribution to the literature is to provide
the extent impacts of domestic food prices increases of many food groups on poverty, not just
the primary food commodities. Information on the effect of food price increase on poverty
gives better policymaking on food security and poverty alleviation. Although, in this paper,
we do not consider the positive impact of rising food prices on food-producing households.

2. Literature review
Poverty is defined as “a pronounced deprivation in well-being” (Haughton and Khandker,
2009). The poor are the people who cannot meet their minimum living standard due to their
low income and lack of control over economic resources. In terms of capability deprivation,
poverty arises because of the inability to function in society due to a lack of, for example,
education, poor health, insecurity and self-confidence.
Although poverty is multidimensional, the most widely used poverty measure is income
(or expenditure) poverty. The poverty measure is determined based on the threshold of
income called the poverty line. Poor people are those who have income (or expenditure) below
the poverty line. The World Bank currently uses a threshold of US$1.25 and US$2 per capita
JABES per day in purchasing power parity as a poverty line. However, poverty lines between
30,2 countries around the world vary much between US$1 and US$40 in 2005 purchasing power
parity (Ravallion, 2012).
In Indonesia, poverty is measured using the cost of basic needs approach, which is based
on income poverty. The poverty line is the amount of expenditure (in rupiahs) required to
meet the minimum basic needs, food and non-food. The poverty line is the sum of the food
poverty line and the non-food poverty line. The food poverty line is per capita expenditure (in
128 rupiahs) equivalent to food consumption of 2,100 kcal per capita per day, while the non-food
poverty line is per capita expenditure (in rupiahs) to meet the minimum needs such as
housing, clothing, education and health. Commodity baskets of basic food needs are
represented by 52 food commodities, while non-food basic needs consist of 51 non-food items
for urban areas and 47 for rural areas (BPS, 2010).
Empirically, the relationship between rising food prices and household welfare focused on
much of the international literature. Some recent studies, for example, conducted by Ivanic
and Martin (2008), McCulloch (2008), Valero-Gill and Valero (2008), Robles and Torero (2010),
Vu and Glewwe (2011), De Hoyos and Medvedev (2011), Ivanic et al. (2012), Ferreira et al.
(2013), Attanasio et al. (2013), Warr and Yusuf (2013), Fujii (2013), Caracciolo et al. (2013),
Ivanic and Martin (2014), Headey (2018), Misdawita et al. (2019), Adekunle et al. (2020) and
Hovhannisyan and Shanoyan (2020). These studies report the negative impact of rising food
prices on welfare or poverty, although they vary depending on the share of food consumption
and household characteristics.
The link between food prices and poverty is summarized as follows. Initially, if household
income does not change, an increase in food prices directly increases household budget spend
on food and then reduces the purchasing power. Households then make food consumption
adjustments by reducing their demand for food or replacing it with other food. Thus, rising
food prices impact changes in household food consumption patterns both in quantity and
quality. Furthermore, rising food prices will increase poverty rates, but prices are not linear
(Ivanic and Martin, 2014). Declining purchasing power makes some households are unable to
meet their minimum food needs, especially for the near-poor and vulnerable households.
Moreover, the near-poor and vulnerable populations are relatively high in Indonesia
(Suryahadi and Sumarto, 2003).
The impact of rising food prices for households that have linkages with the agricultural
commodity market may be positive on increasing incomes (de Hoyos and Medvedv, 2011).
However, as mentioned by McCulloch (2008), in Indonesia, most are net food consumers so
that this positive impact is relatively small, even according to Warr and Yusuf (2013), this
positive impact is only received by owners of agricultural land and capital, not by poor
farmers. It is also in line with Adekunle et al. (2020) that most farmers in Nigeria are net food
buyers, and rising food prices affect welfare losses.
The Hicksian CV is used in the analytical framework of the relationship between food
price changes and welfare. CV is the amount of money needed to keep the household at the
same level of utility as before the price increase. If prices increase, then CV value means the
amount of money must be given as compensation for price increases so that the household
welfare level remains the same as before. If p0 and p1 denote the price vectors before and after
the price increase and u0 is the initial utility, then CV is defined as:



CV ¼ E p1 ; u0  E p0 ; u0 (1)

where Eðp; u0 Þ is the minimum expenditure at price p to reach the utility level u0. A welfare
loss is indicated by a positive CV value, while a negative value means a welfare gain
(Hovhannisyan and Shanoyan, 2020).
3. Data and methodology Impact of food
The principal analytical method used in this study is quadratic almost ideal demand systems price increases
(QUAIDS), proposed by Banks et al. (1997). Besides QUAIDS, this study also uses CV and
poverty indicators to calculate the impact of rising food prices on household welfare and
poverty. The scope of this study is the Indonesian territory using data from household
surveys, the first quarter of 2013 National Socioeconomic Survey (Survei Sosial Ekonomi
Nasional-Susenas) obtained from the National Statistical Office (BPS – Statistics Indonesia).
The first quarter of Susenas 2013 collects data on household consumption of more than 200 129
food commodities in March, with a sample of about 75,000 households throughout Indonesia.
This paper uses 2013 Susenas because it covers more complete food commodities than the
recent Susenas.
The price of food or food groups calculated using the unit value approach, as well as the
ratio of food expenditure to food consumption. The median of the unit value is used to justify
the price of the unit value approach. It overcomes the problem of differences in the food
quality consumed by households (Deaton, 1987). Following Hoang (2009), we used equations:

vi ¼ vi þ wi x þ θD þ εi and pi ¼ vi þ εbi (2)

Ph i
where vi ¼ n1i k vik xik
xi
and vik ¼ xik
qik
are, respectively, the unit value of the ith food group
and the kth food commodity; xik is expenditures (in rupiahs) for the kth food commodity on the
ith food group; xi is subtotal food expenditure for the ith food group; x is the total food
expenditure; qik is the quantity consumed for the kth food commodity on the ith food group; ni
is the number of food commodities of the ith food group; D is a vector of demographic
variables; wi and θ are unknown parameters; εi is residual; vi and vi þ εbi denote mean of unit
value in community level (census block); and pi is adjusted prices will be used in the
QUAIDS model.
The QUAIDS model used in this study is formulated as follows (Poi, 2012):
" # ( " #)2
X
 x λi x
wi ¼ αi þ γ ij ln pj þ βi þ η0i D ln þ ln þ ui (3)
j
m0 ðDÞaðpÞ bðpÞcðp; DÞ m0 ðDÞaðpÞ

where wi is the share of expenditure from the ith food group, pj is the jth food group price, x is
the total household expenditure for food, D is the vector of the demographic variable, p is the
Q η0D P P
price vector, m0 ðDÞ ¼ 1 þ ρ0 D, cðp; DÞ ¼ j pj j , ln aðpÞ ¼ α0 þ ni¼1 αi ln pi þ ni¼1
Pn Qn βi
j¼1 γ ij ln pi ln pj is the Stone price index, bðpÞ ¼ i¼1 pi is a Cobb–Douglas price
aggregator, and αi, γ ij, βi, λi, ηi , ρ are unknown parameters.
Food consumption patterns often differ according to the demographic characteristics,
so we add demographic variables in the above model following Poi (2012). We use the
following demographic variables in our QUAIDS model, household size, the number of
children under five years old, urban–rural classification, education of the head of
household (graduated high school or not), the primary industry of head of the household
(agriculture or not) and income groups (the lowest 40%, 40% middle income and 20% the
highest income). We also use 14 groups of food commodities: rice, non-rice cereals, tubers,
fish, meat, eggs, milk, vegetables, pulses, fruits, oils and fats, beverage ingredients, spices
and other foods.
The restrictions Pimposed onP the QUAIDSP model above to conform to thePdemand theory
are adding up ð ni¼1 αi ¼ 1; ni¼1 γ ij ¼ 0; n
i¼1 β i ¼ 0Þ, homogenous ð
n
j¼1 γ ij ¼ 0Þ and
symmetry ðγ ij ¼ γ ji Þ. Nonlinearity in parameters and restrictions on demand equations is
JABES overcome by using an iterative feasible generalized nonlinear least squares method (IFGNLS)
30,2 to obtain more efficient parameter estimates. The last equation of the demand system must be
discarded in the estimation process to avoid the singularity of ui Covariance matrix due to
adding-up restriction. The estimation process is carried out using the Stata code developed by
Poi (2012) in Stata software.
Following Friedman and Levinson (2002) and Robles and Torero (2010), the impact of
changes in food prices on household welfare is calculated using welfare measures, CV, as
130 follows:

CV X n
Δpi 1 X n X n
Δpi Δpj
0
≅ wi 0 þ eij* wi 0 0 (4)
x i¼1
pi 2 i¼1 j¼1
pi pj

where x0 is the initial household food expenditure before the price increase, p0i is the initial
food price before the price increase, eij* ¼ eij þ eix wj is the compensated cross-price
μ
elasticity; eij ¼ wiji − δij is the uncompensated cross-price elasticity; eix ¼ wμii þ 1 is the
vwi

P  λi ðβi þη0i DÞ
expenditure or income elasticity; μij ≡ vln pj
¼ γ ij − μi αi þ k γ jk ln pk − bðpÞcðp;DÞ
n h io2 h i
vwi λi
x
ln aðpÞ ; μi ≡ vln x
¼ ðβ i þ η 0
i DÞ þ bðpÞcðp;DÞ
ln x
m0 ðDÞaðpÞ
; δij is the Kronecker delta (δij ¼ 1
Δpj
for i 5 j and δij ¼ 0 for i ≠ j); and Δp
p0
i
and p0j
are the magnitude of food price increase used in
i
the simulation process.
Using a different method with Yu (2014), the CV value obtained in equation (4) reduces the
value of household expenditure after food price increases. The poverty indicator is then
calculated using the original value and the reduced value of the household expenditure. The
measure of poverty used is the FGT index of Foster et al. (1984):
!α
* 1 XH
z  xh *

Pα ¼ ψh I z ≥ xh* (5)
N h¼1 z

where Pα* is the poverty measure (α 5 0, 1, 2) after food price increase; N is the number of
populations; H is the number of households; ψ h is the hth household size; z is the poverty
line; xh * ¼ ðx0h − CV Þ=ψ h is the reduced value of per capita household expenditure after
food price increase; x0h is the initial value of hth household expenditure (both food and non-
food) before price increase; and I ðz ≥ xh* Þ is an indicator function, which is 1 if z ≥ xh* , and
0 if vice versa. The measure of poverty before the food prices increase Pα is obtained by
replacing xh* and xh * with x0h and xh 0, respectively, in the above FGT equation where
xh 0 ¼ x0h =ψ h. P0 is the headcount ratio, P1 is the poverty gap index and P2 is the poverty
severity index.
The magnitude of the impact of the increase in food prices on poverty is the difference in
the value of the poverty measure between the original value and the new value after the
increase in food prices. A similar method was carried out by Fujii (2013) and Caracciolo et al.
(2013). Fujii (2013) also reduced the value of household expenditure with CV to calculate the
new poverty indicator. By contrast, Caracciolo et al. (2013) added CV values to the
poverty line.
To assess the impact of rising food prices on poverty in Indonesia, four simulations of
rising food prices are used, a low-price increase of 5% (Sim 1), a moderate price increase of
10% (Sim 2), a high price increase of 15% (Sim 3) and very high increase at 20% (Sim 4). We
apply the 2013 national poverty line, both urban and rural, on household per capita Impact of food
expenditure (before and after simulated price increase) to get the impact of food price increase price increases
on poverty.

4. Results and discussion

4.1 Food inflation Dan poverty trend
Table 1 presents food inflation and poverty trend in Indonesia collected from various 131
publications of BPS – Statistics Indonesia. In 1996–2019, annual general inflation in
Indonesia varied from the lowest 2.78% in 2009 to the highest 77.54% in 1998 during the
economic crisis. General inflation is almost always below two digits (lower than 10%), except
for six times in 1997, 1998, 2001, 2002, 2005 and 2008. From 2009 to 2014, annual inflation has
always been consistently lower than 10%.
Foodstuffs inflation tends to be higher than general inflation, as the annual foodstuffs
inflation was above 10% more often than the general inflation. Double-digit foodstuffs
inflation occurred ten times during the 1996–2019 period, in 1997, 1998, 2001, 2005, 2006,
2007, 2008, 2010, 2013 and 2014. Food inflation was also more varied than general inflation,
where the lowest inflation was 5.25% in 1999, and the highest was 118.35% in 1998. The
variation in annual foodstuffs inflation is even greater when viewed by the food group. The
highest inflation variation was spices, nuts, oils and fat, while the lower variation was eggs

General Foodstuffs Processed food/beverage/ Poverty Food expenditure

Year inflation inflation cigarettes/tobacco inflation headcount ratio* share**
(1) (2) (3) (4) (5) (6)

1996 6.47 6.32 4.33 19.78 50.90

1997 10.31 19.92 7.82 – –
1998 77.54 118.32 94.35 25.72 55.95
1999 2.01 5.25 3.60 26.03 57.61
2000 9.34 4.00 11.09 19.14 58.92
2001 12.55 12.03 14.48 18.41 55.54
2002 10.03 9.13 9.18 18.20 51.67
2003 5.06 1.72 6.24 17.42 49.33
2004 6.40 6.38 4.85 16.66 47.69
2005 17.11 13.91 13.71 15.97 47.50
2006 6.60 12.94 6.36 17.75 47.04
2007 6.59 11.26 6.41 16.58 44.27
2008 11.06 16.35 12.53 15.42 45.08
2009 2.78 3.88 7.81 14.15 45.37
2010 6.96 15.64 6.96 13.33 46.18
2011 3.79 3.64 4.51 12.49 44.29
2012 4.30 5.68 6.11 11.96 44.76
2013 8.38 11.35 7.45 11.37 44.42
2014 8.36 10.57 8.11 11.25 43.72 Table 1.
2015 3.35 4.93 6.42 11.22 41.53 General inflation,
2016 3.02 5.69 5.38 10.86 41.96 foodstuffs inflation,
2017 3.61 1.26 4.10 10.64 44.61 processed food/
beverage/cigarettes/
2018 3.13 3.41 3.91 9.82 43.70 tobacco inflation,
2019 2.72 4.28 3.97 9.41 43.08 poverty headcount
Note(s): *2011–2019 used data in March ratio and food
**Not including tobacco/cigarettes expenditure expenditure share in
Source(s): BPS – Statistics Indonesia, various publications Indonesia, 1996–2019
JABES and milk, meat and fruits. By contrast, inflation of processed foods, beverages, cigarettes and
30,2 tobacco has a slight variation and similar pattern to general inflation.
In 1998, when the economic crisis hit Indonesia from mid-1997, the percentage of the poor
population increased dramatically, while in the next period, the poor population had a
declining trend over time. The same percentage of poor people was reached again in 2003 as
before the economic crisis. The poverty rate also increased slightly in 2006, but then
consistently declined to 9.41% in 2019. The poverty rate increase in 1998 would be closely
132 related to the high inflation rate (Table 1). Likewise, high annual inflation in 2005 was related
to the rise in the poverty rate in 2006.

4.2 Food expenditure share

More than 40% of the household budget in Indonesia is spent on fulfilling food needs,
although the share of food expenditure has a declining trend in recent years (Table 1). By
Engel’s law, this decrease indicates an increase in household welfare. The higher the income,
the smaller the proportion of household expenditure allocated to food, so the share of food
expenditure in urban areas is lower than in rural areas. The food expenditure share decreases
with increasing income, in contrast to the increase in total food expenditure (in rupiahs),
because the income elasticity of food demand is lower than those of non-food.
Changes in food expenditure share are also affected by changes in food prices. In 1998–
1999, the food expenditure share increased dramatically because of the high foodstuffs
inflation during the economic crisis. It strongly suggests the importance of maintaining
affordable food prices to avoid household welfare reduction and poverty rate increase.
The highest share of food group expenditure is rice, vegetables and fish. Rice consumption
is a top priority for household expenditure, with 22.03% of the household budget for food is
allocated for rice purchases. Rice consumption is the highest in rural compared to urban (in
line with BPS, 2021) because rural people eat more carbohydrate-rich food than urban. Rice
expenditure share decreases with increasing income (see also Misdawita et al., 2019). The
vegetable and fish expenditure share in rural areas is also higher than in urban areas
(Table 2).
Expenditure for other foods (w14) is also quite large, mainly because of the large
consumption of processed food, especially in urban and high-income groups. On the other
hand, the expenditure share for each of the ten food groups is 5% or less to the total food
expenditure. The consumption patterns of these food groups have not changed much in the
short term (Faharuddin et al., 2019).

4.3 Expenditure and price elasticity

Our discussion begins with expenditure and price elasticity because the estimates of the
QUAIDS model using IFGNLS on STATA software are not discussed here but presented in
Table A1. Expenditure elasticity is the ratio of increased food expenditure (percent) to the
total expenditure increase (percent). The price elasticity represents the change in food
expenditure concerning the price change (in percent). The resulting expenditure elasticities
and the price elasticities are present in Table 3.
In general, the food expenditure elasticity in urban areas is lower than in rural areas, as
Devi and Purnomosidi (2019) in Java. It indicates that food consumption is still a welfare
symbol of the rural residents so that the rural people will consume more food if their income
increases. Most food groups have expenditure elasticity lower than 1, except for four higher
prices: milk, meat, fruits and other foods. Meanwhile, rice, pulses, oils and fats, non-rice
staples, beverages ingredients and vegetables are the smallest expenditure elasticities. All the
expenditure elasticities are positive, which means that an increase in income would also
 Areas Income groups Overall
Impact of food
Variable Urban (%) Rural (%) Low (%) Middle (%) High (%) (%) price increases
(1) (2) (3) (4) (5) (6) (7)

w1 5 rice 17.41 25.51 28.57 20.45 12.09 22.03

w2 5 non-rice staples 0.45 1.01 1.19 0.54 0.39 0.77
w3 5 rubers 0.76 2.70 2.70 1.48 0.96 1.86
w4 5 fishes 10.01 11.91 10.55 11.98 10.40 11.09 133
w5 5 meat 3.83 2.81 1.91 3.66 5.10 3.25
w6 5 eggs 2.89 2.58 2.49 2.97 2.66 2.71
w7 5 milk 3.55 1.80 1.38 2.75 4.51 2.55
w8 5 vegetables 10.24 12.72 12.97 11.74 8.85 11.65
w9 5 pulses 3.07 2.69 3.19 2.86 2.17 2.85
w10 5 fruits 5.42 4.83 3.90 5.30 7.02 5.08
w11 5 oil and grease 3.85 4.90 5.17 4.39 3.12 4.45
w12 5 beverage ingredients 4.29 5.86 5.77 5.24 3.90 5.18
w13 5 spices 2.24 2.68 2.72 2.51 1.97 2.49
w14 5 processed foods and others 31.99 18.00 17.49 24.14 36.84 24.02 Table 2.
Total 100 100 100 100 100 100 Food group
Household food expenditure share to 40.90 51.44 58.76 50.64 34.71 45.43 expenditure share by
total expenditure urban–rural and
Source(s): Author’s calculation income groups

Uncompensated own-price Compensated own-price

Expenditure elasticity elasticity elasticity
Variables Urban Rural Overall Urban Rural Overall Urban Rural Overall
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

w1 0.305 0.462 0.390 0.420 0.583 0.508 0.371 0.479 0.434

w2 0.769 0.767 0.768 1.897 1.510 1.667 1.892 1.502 1.661
w3 0.728 0.710 0.718 1.022 1.015 1.018 1.016 1.007 1.011
w4 0.970 0.966 0.968 1.062 1.056 1.059 0.971 0.955 0.964
w5 1.445 1.564 1.494 1.180 1.220 1.197 1.120 1.166 1.139
w6 0.931 0.963 0.945 0.934 0.934 0.934 0.906 0.906 0.906
w7 1.650 1.906 1.740 0.778 0.656 0.734 0.710 0.605 0.675
w8 0.791 0.791 0.791 1.141 1.112 1.126 1.060 1.014 1.038
w9 0.899 0.913 0.906 1.376 1.359 1.368 1.346 1.327 1.337
w10 1.421 1.482 1.447 1.254 1.281 1.266 1.173 1.203 1.186
w11 0.720 0.740 0.730 1.170 1.136 1.153 1.143 1.102 1.122
w12 0.777 0.784 0.780 1.022 1.014 1.018 0.989 0.969 0.979 Table 3.
w13 0.926 0.925 0.926 0.879 0.898 0.889 0.858 0.873 0.866 Expenditure and price
w14 1.301 1.548 1.390 1.194 1.326 1.242 0.772 0.992 0.860 elasticity by
Source(s): Author’s calculation urban–rural

increase food expenditure on all food groups. However, only four commodity groups have
relatively higher differences in expenditure elasticity, namely, rice, milk, meat and other
foods. Milk and meat are luxury goods, with the elasticity of milk and meat being higher
than 1.5.
Regarding the own-price elasticity, all the coefficients of price elasticity are negative,
consistent with demand theory, where the higher the price of food, the lower the demand for
the food. Almost all commodity groups are elastic in urban and rural areas, and only four
commodity groups have elasticity less than 1, namely, rice, milk, spices and eggs. However,
JABES only two groups show a relative difference between urban and rural areas, namely, rice and
30,2 non-rice staples. Rice is price inelastic (Aftab et al., 2017), although the price elasticity of rice in
rural areas is higher than in urban areas. On the contrary, the price elasticity of the non-rice
staple food in rural areas is lower.
The cross-price elasticity in urban and rural areas is relatively small, less than 0.5, and not
much different between (Table A2). However, the price increase of rice and other food
received the most response by household consumption. We also find that compensation can
134 change both the absolute value of the cross-price elasticity and the sign of some of the price
elasticity from negative to positive (Table A3).

4.4 Impact of food prices increase on poverty

The upcoming discussions will center on how rising food prices affect household welfare and
poverty. First, we will explain the food price impact using CV, and then we will move on to the
poverty impact using the FGT poverty index. The rising food price’s impact on household
welfare varies according to the magnitude of the increase in food group prices and the
expenditure share of food groups. The higher the price increase and the food group
expenditure share, the higher the impact on the decline in household welfare. Thus, the
highest impact on household welfare is the price increase of other foods, rice, vegetables and
fish. In addition to higher food shares, these four food groups have lower income elasticities.
The increase in prices of other food groups, rice, vegetables and fish by 5% causes a
decrease in welfare (in terms of CV) by 1.345, 0.941, 0.546 and 0.480%, respectively. The
higher the price increase, the percentage of CV decline is also higher. At a very high price
increase (20%), the decline in household welfare is 5.025, 3.638, 2.011 and 1.777%,
respectively (Table 4). We also find that the impact of rising prices of rice, fish, non-rice
cereals and vegetables on household welfare in rural areas is higher than in urban areas. On
the other hand, the impact of rising prices for other food, meat and fruits is higher in urban
household welfare.
Table 5 shows the impact of increasing food group prices on changes in poverty
headcount ratio (P0). Similar to the above CV analysis, the price increases of the four food
groups that have the highest poverty impact are other food groups, rice, vegetables and fish.
It could be because these four food groups have the highest food expenditure share. In total,

Urban Rural Overall

Food Sim Sim Sim Sim Sim Sim Sim Sim Sim Sim Sim Sim
groups 1 2 3 4 1 2 3 4 1 2 3 4
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

w1 0.797 1.578 2.345 3.097 1.113 2.199 3.259 4.291 0.941 1.860 2.760 3.638
w2 0.030 0.056 0.080 0.101 0.052 0.101 0.145 0.185 0.040 0.076 0.109 0.139
w3 0.042 0.081 0.118 0.154 0.058 0.113 0.166 0.215 0.049 0.096 0.140 0.181
w4 0.458 0.893 1.306 1.695 0.506 0.987 1.443 1.874 0.480 0.936 1.368 1.777
w5 0.203 0.395 0.574 0.742 0.168 0.325 0.472 0.610 0.187 0.363 0.528 0.682
w6 0.146 0.285 0.418 0.543 0.144 0.282 0.413 0.538 0.145 0.284 0.416 0.541
w7 0.200 0.392 0.578 0.756 0.131 0.258 0.381 0.501 0.169 0.331 0.488 0.640
w8 0.495 0.964 1.405 1.820 0.608 1.184 1.728 2.241 0.546 1.064 1.552 2.011
w9 0.157 0.303 0.438 0.562 0.166 0.320 0.464 0.595 0.161 0.311 0.449 0.577
w10 0.277 0.537 0.781 1.008 0.254 0.492 0.715 0.922 0.267 0.517 0.751 0.969
w11 0.181 0.351 0.511 0.659 0.225 0.437 0.636 0.822 0.201 0.390 0.567 0.733
w12 0.209 0.407 0.594 0.771 0.280 0.546 0.799 1.037 0.241 0.470 0.687 0.892
w13 0.111 0.216 0.317 0.413 0.131 0.256 0.376 0.489 0.120 0.234 0.344 0.448
Table 4. w14 1.590 3.117 4.582 5.984 1.052 2.051 2.996 3.887 1.345 2.631 3.857 5.025
CV (%) by urban–rural Source(s): Author’s calculation
 Urban Rural Overall
Impact of food
Food Sim Sim Sim Sim Sim Sim Sim Sim Sim Sim Sim Sim price increases
groups 1 2 3 4 1 2 3 4 1 2 3 4
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

Impact on poverty headcount ratio (P0)

w1 0.241 0.414 0.591 0.812 0.429 0.927 1.349 1.774 0.348 0.706 1.023 1.360
w2 0.014 0.017 0.025 0.036 0.025 0.044 0.065 0.088 0.020 0.032 0.048 0.066 135
w3 0.014 0.025 0.038 0.056 0.030 0.047 0.072 0.093 0.023 0.038 0.058 0.077
w4 0.180 0.275 0.369 0.437 0.185 0.372 0.567 0.787 0.183 0.330 0.482 0.636
w5 0.075 0.166 0.201 0.166 0.075 0.121 0.171 0.121 0.075 0.140 0.184 0.140
w6 0.009 0.014 0.014 0.017 0.004 0.014 0.022 0.025 0.007 0.014 0.019 0.022
w7 0.075 0.157 0.201 0.224 0.056 0.099 0.140 0.185 0.065 0.124 0.166 0.201
w8 0.194 0.290 0.389 0.465 0.213 0.451 0.718 0.944 0.205 0.382 0.576 0.737
w9 0.056 0.139 0.175 0.197 0.072 0.121 0.171 0.209 0.065 0.128 0.173 0.204
w10 0.121 0.194 0.236 0.304 0.099 0.181 0.249 0.356 0.108 0.186 0.243 0.334
w11 0.063 0.148 0.194 0.208 0.095 0.162 0.228 0.317 0.081 0.156 0.213 0.270
w12 0.075 0.166 0.201 0.236 0.101 0.194 0.295 0.401 0.090 0.182 0.255 0.330
w13 0.036 0.081 0.139 0.169 0.056 0.099 0.138 0.179 0.047 0.091 0.138 0.174
w14 0.417 0.814 1.194 1.569 0.417 0.860 1.224 1.607 0.417 0.840 1.211 1.591
Impact on poverty gap index (P1)
w1 0.078 0.156 0.234 0.313 0.039 0.078 0.118 0.157 0.107 0.214 0.323 0.432
w2 0.003 0.007 0.009 0.012 0.001 0.003 0.004 0.005 0.005 0.010 0.014 0.018
w3 0.004 0.008 0.011 0.015 0.002 0.004 0.006 0.007 0.005 0.011 0.016 0.020
w4 0.037 0.073 0.107 0.140 0.022 0.044 0.065 0.084 0.048 0.094 0.139 0.182
w5 0.013 0.026 0.038 0.049 0.010 0.019 0.028 0.036 0.016 0.031 0.045 0.058
w6 0.001 0.002 0.003 0.004 0.001 0.001 0.002 0.003 0.001 0.003 0.004 0.005
w7 0.011 0.022 0.033 0.043 0.010 0.019 0.028 0.037 0.012 0.024 0.036 0.048
w8 0.043 0.085 0.125 0.163 0.024 0.047 0.070 0.091 0.058 0.114 0.167 0.219
w9 0.012 0.024 0.034 0.044 0.008 0.015 0.021 0.027 0.016 0.030 0.044 0.057
w10 0.019 0.038 0.055 0.072 0.013 0.026 0.038 0.050 0.024 0.047 0.068 0.088
w11 0.016 0.031 0.045 0.059 0.009 0.017 0.025 0.032 0.021 0.042 0.061 0.078
w12 0.019 0.038 0.056 0.073 0.010 0.020 0.029 0.038 0.027 0.052 0.076 0.099
w13 0.009 0.018 0.027 0.035 0.005 0.010 0.015 0.020 0.012 0.024 0.036 0.046
w14 0.091 0.182 0.271 0.358 0.079 0.158 0.238 0.317 0.101 0.200 0.296 0.389
Impact on poverty severity index (P2)
w1 0.024 0.048 0.073 0.098 0.012 0.023 0.035 0.047 0.033 0.067 0.102 0.137
w2 0.001 0.002 0.003 0.004 0.000 0.001 0.001 0.001 0.002 0.003 0.004 0.005
w3 0.001 0.002 0.004 0.005 0.001 0.001 0.002 0.002 0.002 0.003 0.005 0.006
w4 0.011 0.022 0.033 0.043 0.007 0.013 0.019 0.025 0.015 0.029 0.043 0.057
w5 0.004 0.008 0.012 0.015 0.003 0.006 0.008 0.011 0.005 0.010 0.014 0.018
w6 0.000 0.001 0.001 0.001 0.000 0.000 0.001 0.001 0.000 0.001 0.001 0.002
w7 0.003 0.007 0.010 0.013 0.003 0.006 0.008 0.011 0.004 0.008 0.011 0.015
w8 0.013 0.026 0.039 0.051 0.007 0.014 0.021 0.027 0.018 0.036 0.052 0.069
w9 0.004 0.007 0.011 0.014 0.002 0.004 0.006 0.008 0.005 0.009 0.014 0.018
w10 0.006 0.012 0.017 0.022 0.004 0.008 0.011 0.015 0.007 0.015 0.021 0.028
w11 0.005 0.010 0.014 0.018 0.003 0.005 0.007 0.010 0.007 0.013 0.019 0.024
w12 0.006 0.012 0.017 0.022 0.003 0.006 0.009 0.011 0.008 0.016 0.024 0.031 Table 5.
w13 0.003 0.006 0.008 0.011 0.002 0.003 0.005 0.006 0.004 0.008 0.011 0.014 Impact of food price
w14 0.028 0.056 0.084 0.111 0.023 0.047 0.071 0.096 0.031 0.063 0.093 0.123 increase on poverty
Source(s): Author’s calculation rate by rural–urban

5% of the price increase of other foods, rice, vegetables and fish causes an increase in the
percentage of poor people respectively by 0.417, 0.348, 0.205 and 0.183 points. The higher the
price increases, the higher the impact on poverty, even though not linear. The 20% increase in
JABES the price of each food group causes an increase in poverty headcount ratio 1.591 points (other
30,2 food), 1.360 points (rice), 0.737 points (vegetables) and 0.636 points (fish).
Using a poverty line of US$1.25 per capita per day, Ivanic et al. (2012) found that a 20%
increase in world rice prices caused an increase in the poverty headcount ratio in Indonesia by
0.57 points from the original 7.5% in 2010. This finding is higher than Ivanic et al. (2012) and
Warr and Yusuf (2013). The difference could be because of domestic food prices used here,
and we do not consider the positive impact of rising food prices on food-producing
136 households. The increase in food prices in rural areas reduces the negative impact on rural
poverty because the income of food-producing households is rising (Friedman and
Levinsohn, 2002). However, the effect is relatively small (Warr and Yusuf, 2013).
The effect of rising food prices on poverty in rural areas is higher than in urban areas, in
line with Warr and Yusuf (2013) and Misdawita et al. (2019), especially for the four food
groups. An increase of 20% in the price of these food groups increases the percentage of poor
people by 1.774 points in rural areas and 0.812 points in urban areas (rice); 1.607 points in
rural areas and 1.569 points in urban areas (other foods); 0.944 points in rural areas and 0.465
points in urban areas (vegetables); 0.787 points in rural areas and 0.437 points in urban areas
(fish). Even though farmers mostly live in rural, Warr and Yusuf (2013) argue that the
beneficiaries of rising food prices in rural areas are not rural poor people but landowners,
many of whom live in urban areas.
This study reveals that price increases in foods that are frequently monitored by the
government (other than rice), such as meat, granulated sugar (beverage ingredients), chilies
(spices) and onions (spices), have a relatively lower impact on poverty. It is due to these food
groups having a relatively small share of expenditure (Table 2). A 20% of price increase
caused an increase in the poverty rate by 0.140 points (meat), 0.330 points (beverage
ingredients) and 0.174 points (spices). However, the rise of these foods prices usually
politically draws public attention because some are imported foodstuffs. However, the
government needs to be aware of the high increases in food commodity prices
simultaneously. If the prices of all food groups increase simultaneously by 20%, the
percentage of the poor will increase by 6.142 points. For example, if all food prices increased
by 20% in 2020, the poverty headcount ratio would be increased from 9.41% in 2019 to
15.55% in 2020. This increase in food prices for all food commodities by 20% also impacts
rural poverty more than urban areas (7.086 points increase in rural poverty headcount ratio
and 4.896 points increase in urban poverty).
The effect of rising food prices on other poverty indicators, namely, the poverty gap index
and poverty severity index, has a similar pattern to the impact of food prices on the headcount
ratio as described above. The higher effect also comes from the four food groups, namely,
other foods, rice, vegetables and fish (Table 4).

5. Conclusion and policy implications

Using household survey data, we use demand analysis to calculate the impact of rising food
group prices on household welfare and poverty in Indonesia. The welfare measure used is CV
to calculate the impact of price increases on changes in household consumption. The 2013
national poverty line then applied to obtain the magnitude of rising prices’ impact on
increasing poverty. Although we did not take into account the relatively minor positive
impact of rising food prices on the increasing income of food-producing households, the
findings of this study will be extremely useful for government policies aimed at controlling
food prices and combating poverty. The findings of this study support previous studies
regarding the negative impact of rising food prices on reducing household welfare and
increasing poverty. This negative impact is higher in rural households than in urban areas.
The highest impact comes from the price increase of the highest expenditure share food
groups; rice, vegetables and fish. A very high price increase (20%) causes an increase in Impact of food
poverty incidence 1.591 points (other food), 1.360 points (rice), 0.737 points (vegetables) and price increases
0.360 points (fish). Conversely, the increase in prices of other foodstuffs, meat, sugar
(beverage ingredients), chilies (spices) and onions (spices) have a relatively small impact.
Our findings suggest some policies recommendation to reduce the negative impacts of
this high food price increase. To begin with, people need appropriate food price policies to
avoid uncontrolled price increases in the short run. However, as mentioned above, high food
prices are harmful to consumers, even though some food producers benefit from increased 137
income. The pricing policy should be predominantly for food commodities with a large
share of expenditure and higher poverty impact. If price stability sustains during the
current COVID-19 pandemic, a dramatic increase in poverty incidence in Indonesia might
not occur.
In addition, the price policies must execute in conjunction with other consumer protection
policies such as food aid or cash transfer for the lowest income population. Based on the
findings above, this policy will reduce the expenditure burden of vulnerable groups due to
rising food prices. The protection policies for the poor were an effective anti-poverty program
during the crisis in 1997–1999 (Dhanani and Islam, 2002).
Finally, this study also recommends rural development policies and promotes agricultural
growth. In addition to the higher poverty impact on the rural population, the rural areas are
generally identical with agriculture as food producers. In the long term, investment in
agriculture, especially food crops, will increase food security through domestic food
sufficiency. Agricultural economic growth is also crucial in poverty alleviation in Indonesia
(Suryahadi et al., 2009). Increasing domestic food production will protect the country against
international food price increases (Headey, 2018).
This paper does not consider the positive impact of rising food prices on food-producing
households. Although the effect is relatively small, we recommend that further research
should take this into account. The calculations will be more sophisticated, but the model will
be more exhaustive. It is also necessary to conduct research using different methods and
up-to-date data to enrich the analysis of the impact of rising food prices in Indonesia.

References
Adekunle, C.P., Akinbode, S.O., Shittu, A.M. and Momoh, S. (2020), “Food price changes and farm
households’ welfare in Nigeria: direct and indirect approach”, Journal of Applied Economics,
Vol. 23 No. 1, pp. 409-425.
Aftab, S., Yaseen, M.R. and Anwar, S. (2017), “Impact of rising food prices on consumer welfare in the
most populous countries of South Asia”, International Journal of Social Economics, Vol. 44
No. 8, pp. 1062-1077.
Allo, A.G., Satriawan, E. and Arsyad, L. (2018), “The impact of rising food prices on farmers’ welfare
in Indonesia”, Journal of Indonesian Economy and Business, Vol. 33 No. 3, pp. 193-215.
Attanasio, O.V., Di Maro, V., Lechene, V. and Philips, D. (2013), “Welfare consequences of food prices
increases: evidence from rural Mexico”, Journal of Development Economics, Vol. 104,
pp. 136-151.
Banks, J., Blundell, R. and Lewbel, A. (1997), “Quadratic Engel curves and consumer demand”, The
Review of Economics and Statistics, Vol. 79 No. 4, pp. 527-539.
BPS (2010), Analisis dan Penghitungan Tingkat Kemiskinan 2010 (The Analysis and Measurement of
Poverty 2010), Badan Pusat Statistik, Jakarta.
BPS (2019), Penghitungan dan Analisis Kemiskinan Makro di Indonesia Tahun 2019 (The
Measurement and Analysis of Poverty in Indonesia, 2019), Badan Pusat Statistik, Jakarta.
JABES BPS (2021), Pengeluaran untuk Konsumsi Penduduk Indonesia 2021: Berdasarkan Susenas Maret
2019 (Expenditure for Consumption of Population of Indonesia 2021, Based on The 2021
30,2 March Susenas), Badan Pusat Statistik, Jakarta.
Caracciolo, F., Depalo, D. and Macias, J.B. (2013), “Food price changes and poverty in Zambia: an
empirical assessment using household microdata”, Journal of International Development, Vol. 26
No. 4, pp. 492-507.
De Hoyos, R.E. and Medvedev, D. (2011), “Poverty effects of higher food prices: a global perspective”,
138 Review of Development Economics, Vol. 15 No. 3, pp. 387-402.
Deaton, A. (1987), “Estimation of own- and cross-price elasticities from household survey data”,
Journal of Econometrics, Vol. 36 Nos 1-2, pp. 7-30.
Devi, L. and Purnomosidi, R. (2019), “Estimation of demand elasticity for food commodities in Java
Island”, JEJAK: Jurnal Ekonomi dan Kebijakan, Vol. 12 No. 1, pp. 54-67.
Dhanani, S. and Islam, I. (2002), “Poverty, vulnerability and social protection in a period of crisis: the
case of Indonesia”, World Development, Vol. 30 No. 1, pp. 1211-1233.
Faharuddin, F., Mulyana, A., Yamin, M. and Yunita, Y. (2017), “Nutrient elasticities of food
consumption: the case of Indonesia”, Journal of Agribusiness in Developing and Emerging
Economies, Vol. 7 No. 3, pp. 198-217.
Faharuddin, F., Yunita, Y., Mulyana, A. and Yamin, M. (2019), “Agricultural households’ food demand:
evidence from Indonesia”, Asian Journal of Agriculture and Development, Vol. 16 No. 2,
pp. 45-58.
Ferreira, F.H.G., Fruttero, A., Leite, P.G. and Lucchetti, L.R. (2013), “Rising food prices and household
welfare: evidence from Brazil in 2008”, Agricultural Economics, Vol. 64 No. 1, pp. 151-176.
Foster, J., Greer, J. and Thorbecke, E. (1984), “A class of decomposable poverty measures”,
Econometrica, Vol. 52 No. 3, pp. 761-766.
Friedman, J. and Levinshon, J. (2002), “The distributional impacts of Indonesia’s financial crisis on
household welfare: a ‘rapid response’ methodology”, The World Bank Economic Review, Vol. 16
No. 3, pp. 397-423.
Fujii, T. (2013), “Impact of food inflation on poverty in the Philippines”, Food Policy, Vol. 39, pp. 13-27.
Haughton, J. and Khandker, S.R. (2009), Handbook on Poverty and Inequality, The World Bank,
Washington, District of Columbia.
Headey, D.D. (2018), “Food prices and poverty”, The World Bank Economic Review, Vol. 32 No. 3,
pp. 676-691.
Hoang, L.V. (2009), “Estimation of food demand from household survey data in Vietnam”, Depocen
Working Paper Series No. 2009/12.
Hovhannisyan, V. and Shanoyan, A. (2020), “An empirical analysis of the welfare consequences of
rising food prices in urban China: the Easi approach”, Applied Economic Perspectives and Policy,
Vol. 42 No. 4, pp. 796-814.
Ivanic, M. and Martin, W. (2008), “Implication of higher global food prices for poverty in low-income
countries”, Agricultural Economics, Vol. 39 No. Supplement, pp. 405-416.
Ivanic, M. and Martin, W. (2014), “Short- and long-run impacts of food price changes on poverty”,
Policy Research Working Paper No. 7011, Development Research Group, Agriculture and Rural
Development Team.
Ivanic, M., Martin, W. and Zaman, H. (2012), “Estimating the short-run poverty impacts of the 2010–11
surge in food prices”, World Development, Vol. 40 No. 11, pp. 2302-2317.
Khoiriyah, N., Anindita, R., Hanani, N. and Muhaimin, A.W. (2020), “Animal food demand in
Indonesia: a quadratic almost ideal demand system approach”, AGRIS on-Line Papers in
Economics and Informatics, Vol. 12 No. 2, pp. 85-97.
McCulloch, N. (2008), “Rice prices and poverty in Indonesia”, Bulletin of Indonesian Economic Studies,
Vol. 44 No. 1, pp. 45-64.
Misdawita, M., Hartono, J. and Nugroho, A. (2019), “Impacts of food prices on the economy: social Impact of food
accounting matrix and microsimulation approach in Indonesia”, Review of Urban and Regional
Development Studies, Vol. 31 Nos 1-2, pp. 137-154. price increases
Pangaribowo, E.H. and Tsegai, D. (2011), “Food demand analysis of Indonesian households with
particular attention to the poorest”, ZEF-Discussion Papers on Development Policy No. 151.
Poi, B.P. (2012), “Easy demand-system estimation with quaids”, Stata Journals, Vol. 12 No. 3,
pp. 433-446.
139
Ravallion, M. (2012), “Poverty lines across the world”, in Jefferson, P.N. (Ed.), Oxford Handbook of the
Economics of Poverty, Oxford University Press.
Robles, M. and Torero, M. (2010), “Understanding the impact of high food prices in Latin America”,
Economia, Vol. 10 No. 2, pp. 117-159.
Suryahadi, A. and Sumarto, S. (2003), “Poverty and vulnerability in Indonesia before and after the
economic crisis”, Asian Economic Journal, Vol. 17 No. 1, pp. 45-64.
Suryahadi, A., Suryadarma, D. and Sumarto, S. (2009), “The effects of location and sectoral
components of economic growth on poverty: evidence from Indonesia”, Journal Development
Economics, Vol. 89 No. 1, pp. 109-117.
Valero-Gill, J.N. and Valero, M. (2008), “The effects of rising food prices on poverty in Mexico”,
Agricultural Economics, Vol. 39 No. Supplement, pp. 485-496.
Vu, L. and Glewwe, P. (2011), “Impacts of rising food prices on poverty and welfare in Vietnam”,
Journal of Agricultural and Resource Economics, Vol. 36 No. 1, pp. 14-27.
Warr, P. and Yusuf, A.A. (2013), “World food prices and poverty in Indonesia”, The Australian Journal
of Agricultural and Resource Economics, Vol. 58 No. 1, pp. 1-21.
Widarjono, A. (2012), “Food and nutrient demand in Indonesia”, Unpublished dissertation, Oklahoma
State University.
World Bank (2020), Poverty and Shared Prosperity 2020: Reversals of Fortune, World Bank,
Washington, District of Columbia.
Yu, X. (2014), “Raising food prices and welfare change: a simple calibration”, Applied Economics
Letters, Vol. 21 No. 9, pp. 643-645.

Corresponding author
Faharuddin Faharuddin can be contacted at: fahar26@gmail.com
 30,2

140
JABES

Table A1.

the QUAIDS model

Parameter estimates of
Appendix

Dependent variables
Independent variables w1 w2 w3 w4 w5 w6 w7 w8 w9 w10 w11 w12 w13 w14
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

Alpha-i (constants) 0.320*** 0.019*** 0.030*** 0.156*** 0.150*** 0.015*** 0.230*** 0.010 0.030*** 0.180*** 0.002 0.025*** 0.017*** 0.518***
Beta-i (ln x/p) 0.012** 0.004*** 0.006*** 0.004 0.011*** 0.008*** 0.049*** 0.005 0.017*** 0.004 0.003* 0.001 0.005*** 0.031***

Gamma-ij
ln p1 0.110*** 0.002*** 0.003*** 0.021*** 0.005*** 0.001* 0.022*** 0.006*** 0.008*** 0.021*** 0.006*** 0.001** 0.006*** 0.057***
ln p2 0.006*** 0.000 0.000* 0.001** 0.001*** 0.000** 0.003*** 0.001*** 0.004*** 0.003*** 0.000 0.000 0.001***
ln p3 0.000 0.001*** 0.000 0.001*** 0.000 0.003*** 0.001*** 0.002*** 0.000 0.000* 0.000 0.002***
ln p4 0.006*** 0.000 0.001* 0.004*** 0.006*** 0.002*** 0.003*** 0.001*** 0.002*** 0.000* 0.024***
ln p5 0.006*** 0.004*** 0.001* 0.001 0.000 0.002*** 0.001*** 0.001** 0.000 0.012***
ln p6 0.002*** 0.003*** 0.001*** 0.002*** 0.002*** 0.001*** 0.001*** 0.003*** 0.002***
ln p7 0.018*** 0.002*** 0.002*** 0.003*** 0.001*** 0.002*** 0.002*** 0.014***
ln p8 0.015*** 0.004*** 0.004*** 0.003*** 0.000 0.001*** 0.004***
ln p9 0.012*** 0.003*** 0.001 0.003*** 0.001*** 0.004***
ln p10 0.012*** 0.002*** 0.000 0.002*** 0.017***
ln p11 0.006*** 0.000 0.001*** 0.001**
ln p12 0.001*** 0.001*** 0.001
ln p13 0.003*** 0.000*
ln p14 0.008***
Lambda-i ((ln x/p)^2) 0.008*** 0.001*** 0.001*** 0.000 0.001** 0.001*** 0.003*** 0.002*** 0.001*** 0.002*** 0.001*** 0.001*** 0.000* 0.011***

Eta-i
D1 0.001** 0.000*** 0.000 0.001*** 0.001*** 0.000*** 0.001*** 0.001*** 0.000 0.001*** 0.000 0.001*** 0.000*** 0.005***
D2 0.008*** 0.000*** 0.000*** 0.001*** 0.000** 0.000*** 0.002*** 0.001*** 0.000 0.001*** 0.000*** 0.000*** 0.000** 0.008***
D3 0.005*** 0.000 0.000*** 0.001*** 0.000** 0.000*** 0.008*** 0.001*** 0.000*** 0.000 0.001*** 0.001*** 0.000*** 0.001**
D4 0.001** 0.000 0.000 0.000** 0.001*** 0.000*** 0.002*** 0.001*** 0.000*** 0.001*** 0.000** 0.001*** 0.000*** 0.001**
D5 0.004*** 0.000*** 0.000*** 0.002*** 0.000 0.000 0.001*** 0.002*** 0.000*** 0.000 0.001*** 0.001*** 0.000*** 0.011***
D6 0.003*** 0.000*** 0.000 0.004*** 0.002*** 0.001*** 0.001*** 0.001*** 0.001*** 0.001*** 0.001*** 0.000** 0.000*** 0.002***
D7 0.008*** 0.000*** 0.000** 0.004*** 0.003*** 0.000*** 0.002*** 0.005*** 0.003*** 0.003*** 0.002*** 0.002*** 0.001*** 0.009***
Rho Rho 1 5 0.186*** Rho 2 5 0.048*** Rho 3 5 0.001 Rho 4 5 0.055*** Rho 5 5 0.027* Rho 6 5 0.049*** Rho 7 5 0.195***
Note(s): *** significant at 1% ** significant at 5% * significant at 10%
The empty cells are not stated because of the symmetry constraint
Source(s): Author’s calculations
Food groups w1 w2 w3 w4 w5 w6 w7 w8 w9 w10 w11 w12 w13 w14
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

w1 0.508 0.012 0.009 0.059 0.034 0.018 0.026 0.059 0.052 0.034 0.039 0.021 0.021 0.032
w2 0.208 1.667 0.015 0.025 0.101 0.099 0.029 0.374 0.164 0.404 0.312 0.038 0.001 0.290
w3 0.226 0.012 1.018 0.119 0.023 0.057 0.043 0.319 0.028 0.189 0.020 0.042 0.000 0.378
w4 0.224 0.004 0.010 1.059 0.009 0.005 0.038 0.058 0.021 0.038 0.015 0.015 0.003 0.260
w5 0.045 0.016 0.014 0.030 1.197 0.122 0.053 0.042 0.005 0.016 0.033 0.012 0.013 0.039
w6 0.005 0.029 0.022 0.015 0.137 0.934 0.049 0.035 0.066 0.081 0.038 0.020 0.090 0.053
w7 0.401 0.001 0.023 0.185 0.070 0.067 0.734 0.089 0.005 0.017 0.031 0.071 0.064 0.018
w8 0.025 0.028 0.028 0.068 0.013 0.014 0.005 1.126 0.033 0.062 0.022 0.005 0.003 0.146
w9 0.197 0.040 0.010 0.070 0.029 0.060 0.023 0.124 1.368 0.121 0.013 0.094 0.034 0.084
w10 0.318 0.067 0.042 0.020 0.010 0.029 0.000 0.053 0.055 1.266 0.031 0.017 0.028 0.057
w11 0.118 0.063 0.005 0.012 0.001 0.034 0.008 0.052 0.017 0.081 1.153 0.005 0.027 0.132
w12 0.009 0.006 0.008 0.011 0.037 0.007 0.017 0.013 0.068 0.017 0.002 1.018 0.016 0.110
w13 0.265 0.001 0.002 0.010 0.002 0.109 0.062 0.029 0.045 0.091 0.037 0.026 0.889 0.022
w14 0.168 0.004 0.007 0.051 0.009 0.019 0.015 0.007 0.026 0.014 0.007 0.010 0.009 1.242
Note(s): The cells in italic represent own-price elasticities
Source(s): Author’s calculation
price increases
Impact of food

141

(Marshallian)
price elasticities
Uncompensated cross-
Table A2.
 30,2

142

(Hicksian)
JABES

Table A3.

price elasticities
Compensated cross-
Food groups w1 w2 w3 w4 w5 w6 w7 w8 w9 w10 w11 w12 w13 w14
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

w1 0.434 0.015 0.005 0.020 0.049 0.029 0.013 0.103 0.065 0.012 0.056 0.041 0.012 0.140
w2 0.354 1.661 0.008 0.050 0.131 0.076 0.056 0.461 0.189 0.362 0.344 0.000 0.020 0.501
w3 0.089 0.006 1.011 0.190 0.005 0.035 0.019 0.400 0.004 0.149 0.050 0.077 0.017 0.575
w4 0.040 0.004 0.019 0.964 0.046 0.024 0.005 0.167 0.054 0.091 0.025 0.033 0.020 0.526
w5 0.239 0.028 0.001 0.117 1.139 0.078 0.002 0.126 0.055 0.066 0.029 0.086 0.024 0.449
w6 0.185 0.021 0.012 0.078 0.101 0.906 0.017 0.141 0.097 0.133 0.077 0.026 0.113 0.207
w7 0.070 0.014 0.005 0.014 0.003 0.015 0.675 0.106 0.053 0.079 0.041 0.015 0.022 0.496
w8 0.175 0.034 0.036 0.146 0.043 0.037 0.032 1.038 0.007 0.105 0.011 0.044 0.016 0.363
w9 0.369 0.047 0.001 0.159 0.064 0.087 0.054 0.023 1.337 0.170 0.051 0.139 0.056 0.165
w10 0.043 0.055 0.027 0.162 0.046 0.072 0.050 0.215 0.103 1.186 0.091 0.055 0.063 0.454
w11 0.257 0.069 0.012 0.060 0.027 0.055 0.033 0.029 0.041 0.121 1.122 0.041 0.045 0.332
w12 0.158 0.000 0.016 0.066 0.067 0.016 0.010 0.100 0.094 0.060 0.034 0.979 0.035 0.324
w13 0.089 0.007 0.007 0.081 0.038 0.137 0.031 0.075 0.076 0.142 0.075 0.071 0.866 0.277
w14 0.096 0.015 0.021 0.188 0.063 0.022 0.062 0.149 0.020 0.091 0.050 0.059 0.025 0.860
Note(s): The cells in italic represent own-price elasticities
Source(s): Author’s calculation