Long-term Impacts of Global Food Crisis on Production Decisions : Evidence from Farm Investments in Indonesia

Nose, Manabu; Yamauchi, Futoshi

Long-term Impacts of Global Food Crisis on Production Decisions : Evidence from Farm Investments in Indonesia

2012

Nose, Manabu | Yamauchi, Futoshi

Did the rise in food prices have a long-term impact on agricultural production? Using household-level panel data from seven provinces of Indonesia, this paper finds that the price shock created a forward-looking incentive to invest, which can dynamically enhance productivity in agriculture. It also finds that the impact of the price shock on investment behavior differs by initial wealth. In response to price increases, wealthy farmers invested more in productive assets, while poor farmers increased their financial savings as well as consumption. Price spikes relax liquidity constraints, which increases investments among the richer while do so savings and consumptions among the poor, possibly leading to diverging income inequality in the long run.

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AGROVOC Keywords

agricultural development agricultural economics agricultural inputs agricultural land agricultural production agricultural productivity agricultural products agricultural sector agriculture beverages cacao cash flow cassava commodities crop production developing countries eggs expenditure farm size farmer farmers food consumption food prices fruits human capital income insurance international cooperation irrigation land productivity liquid assets liquidity maize marketing meat milk natural disasters nutrition paddy producer prices purchasing rubber rural areas savings small farmers transaction costs vegetable crops vegetables volatility

Bibliographic information

Publisher

World Bank, Washington, DC

Other Subjects

Regional variation; Price increases; Income gains; Household welfare; Connectivity; Expenditures; Market integration; Land asset; Price level; Financial markets; Financial support; Effect of liquidity; Land size; Regional dummies; Village level; Investment decision; Domestic market; Financial assets; Price uncertainty; Income inequality; Commodity prices; Landholding size; Food policy; Flour; International food policy research institute; Consumer price; Disposable income; Consumer price index; Farming activities; Income shock; Future price; Binding constraint; Capital stock; Price levels; Capital investment; Political economy; Household head; Substitution; Potato; Food expenditure; Portfolios; Wholesale price; Food expenditures; Poor farmers; Investment decisions; Outputs; Economic shocks; Asset holdings; Price changes; Capital intensity; Household size; Price inflation; Risk premium; Exposures; Public policy; Food policy research; Agricultural activity; Agency costs; Price change; Substitution effect; Future prices; Agricultural technologies; Interest rate; Commodity; Food price inflation; Exposure; Low-income countries; Market structures; Price effect; Credit constraints; Long-term investment; Remote areas; Regional dispersion; Commodity price; Price increase; Schooling; Income shocks; Factors of production; Food price; Collateral; Food crop; Developing country; Volatilities; Infrastructure projects; Changes in poverty; Civil war; Output; Cocoa; Farm efficiency; Food commodities; Poor households

License

Policy Research Working Paper; No. 6065http://creativecommons.org/licenses/by/3.0/World BankCC BY 3.0 Unported

Source

Policy Research Working Paper; No. 6065

In AGRIS since: 2014-09-15

Format: AGRIS AP

Data Provider

This bibliographic record has been provided by World Bank

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Links

http://hdl.handle.net/10986/9356

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