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Identifying factors inﬂuencing rice production and consumption in Indonesia
Article · January 2019

DOI: 10.23917/jep.v19i2.5939
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Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan, 19 (2), 2018, 172-185
Identifying Factors Influencing Rice Production and

Consumption in Indonesia
Abdul Bashir1, Saadah Yuliana2
Department of Development Economics,
1, 2
Faculty of Economics, Universitas Sriwijaya, Indonesia

Corresponding Author: [email protected], [email protected]
Recieved: March 2018 | Revised: July 2018 | Accepted: November 2018
Abstract
This study analyzes factors affecting rice production and consumption in Indonesia from 1990-2014,
the data source is from Central Bureau of Statistics (BPS). The method used is model of multiple
linear regression equation with ordinary least square estimator (OLS). Our findings indicate that rice
production can be affected by human capital, labor, wages, wetland, urban population, and rice prices;
on the other side, technology has no effect on rice production. Other findings on the rice consumption
model were influenced by human capital, per capita income, population, and consumption the previous
year, and on the other side, rice prices have no affect rice consumption in Indonesia. It’s an important
note for the government in making the right program policies such as the development of irrigation
systems and better water management.
Keywords: consumption, human capital, rice price, rice production, technology.
JEL classification: Q1, Q11, Q18.
How to Cite: Bashir, A., & Yuliana, S. (2018). Identifying factors influencing rice production
and consumption in Indonesia. Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan
Pembangunan, 19(2). doi:https://doi.org/10.23917/jep.v19i2.5939
DOI: https://doi.org/10.23917/jep.v19i2.5939
1. Introduction Increasing rice food security is a key

Rice food is the most basic human need, so development priority, as rice food is the most
the availability of rice for the community must basic need for humans (Clarete et al., 2013; FAO,
always be guaranteed (Clapp, 2017; Timmer, 2009). Increasing population growth requires the
2013). In addition, rice is one of the most availability of food from agricultural products
important staple foods in the world (Fairhurst & sufficient to strengthen food security in a region
Dobermann, 2002). This statement is particularly (Clapp, 2017), this is because rice food security
applicable in Asia, where rice is the staple food has a central position in increasing productivity
for the majority of the population at the middle and improving the quality of life of citizens.
to low level. The Asian continent is also home to As an illustration of data published by FAO
farmers producing about 90% of the world’s total in 2014, there are five largest rice producing
rice production (Clarete, Adriano, & Esteban, countries in the world namely China, India,
2013). Indonesia, Bangladesh and Vietnam, and the
Jurnal Ekonomi Pembangunan, ISSN 1411-6081, E-ISSN 2460-9331 172

share of rice production to the world in 2014 Japan and South Korea (ASEAN, 2008), to be used
respectively 28.06%, 20, 97%, 9.52%, 7.07% in response to the volatility of international rice
and 6.06% respectively (Table 1). Although the prices or when required due to natural disasters
five countries are the largest rice producers in or other humanitarian assistance (Clarete et
the world, only 5% of global rice production is al., 2013). The most of rice supply significant
traded on international markets (Jha, Kubo, & contribution in this agreement comes from China,
Ramaswami, 2016, implying that rice prices are Japan and South Korea.
vulnerable to changes in supply and demand. Of the five countries, Indonesia is one of the
Furthermore, rice supply in the international agrarian countries that are able to produce rice
market only comes from three rice exporting in large quantities. Yet almost every year, rice
countries, namely Thailand, India and Viet Nam imports are still being used for food stocks and
(Jha et al., 2016). The sudden change in the supply some of the areas lacking, in addition to
rice exporter country’s trade policy could lead keeping rice prices stable at the regional level.
to stockpiling and speculation by rice importing One other cause related to the fulfillment of rice
countries, it is likely to raise the price of rice needs (rice consumption) in Indonesia is the total
significantly, and with dangerous risks, as it will population which every year is growing, in 2014
have an impact on increasing poverty in Asian per capita rice consumption of 97 kg per year, and
countries (Grochowska & Kosior, 2013; Inoue, the average growth of per capita rice consumption
Okae, & Akashi, 2015; Milovanovic & Smutka, increased by 0.80% during 1990-2014. The slower
2017). growth of rice consumption one of them is caused
The phenomenon occurred in 2008 when the by the government policy currently to increase
price of rice increased significantly and caused the rice production, and reduce rice consumption by
poverty rate in the Asian continent to increase. 1.5% per year, with the intention to accelerate
In response to the situation, various countries food diversification consumption and or to support
in the Asian continent have signed the ASEAN rice import policy (Wardis, 2014). On the other
Plus Three Emergency Rice Reserve (APTERR) side, rice consumption can also be influenced by
agreement stipulating that a total of 0.78 million per capita income, population, rice stock, and
tons of rice will be held jointly by participating subsidy from the government (Azwardi, et al.,
countries, namely ASEAN countries plus China, 2016; Nuryanti, 2005).
Table 1. The five biggest rice producing countries in the world

Ranking Countries Production volume (ton) Share to world (%)
1 China 208.100.000 28,06
2 India 155.500.000 20,97
3 Indonesia 70.600.000 9,52
4 Bangladesh 52.400.000 7,07
5 Viet Nam 44.900.000 6,06
Total of five countries 531.500.000 71,68
Total of world 741.500.000 100,00
Source: FAOSTAT Data, December 2014
173 Jurnal Ekonomi Pembangunan, ISSN 1411-6081, E-ISSN 2460-9331

Table 2. Data and data source
Variable Description Unit Source
QR Rice production tons Indonesia Statistics (BPS)

CRP Rice consumption per capita kg Indonesia Statistics (BPS)
HC Human capital index (Barro & Lee, 2013) index Federal Reserve Bank (FRED)
GDPC GDP per capita million Indonesia Statistics (BPS)
POP Population people Indonesia Statistics (BPS)
URB Urban population people Indonesia Statistics (BPS)
PRR Rice price rupiah Indonesia Statistics (BPS)
L Labor people Indonesia Statistics (BPS)
LA Wetland area hectare Indonesia Statistics (BPS)
WF Wages rupiah Indonesia Statistics (BPS)
T Technology (ratio QR to wetland) ratio Indonesia Statistics (BPS)
On the production side, growth and other side, changes of economic development in
development of rice production has been the future will to change the economic structure,
entirely dependent on increasing yields. To meet which will also cause to changes in workforce
demand, rice production can be increased either structure, of course, the changes that occur will
by increasing the area of rice cultivation or by cause urbanization in the future which will
increasing the efficiency of existing resources also impact to agriculture production and food
allocated for rice production (Koirala, Mishra, production (Satterthwaite, McGranahan, &
& Mohanty, 2013). Increased production can be Tacoli, 2010).
arranged in two ways; (i) a shift in production Several previous studies that also used
limits, and (ii) by developing and promoting macro assumptions, such as studies that have
technology to increase production. in addition, conducted by Azwardi et al. (2016); Malian, Sudi,
increased rice production can also contribute & Mewa (2004); and Nuryanti (2005) indicated
to reducing poverty, especially in rural areas that previous study has focused on factors that
(Bordey, 2010; Dawe, 2000). Increased production influence rice production and consumption such
can also help increase income and food security as rice prices, total labor, land area, economic
in most populations in Indonesia, especially growth, rice consumption, productivity as
in populations whose main livelihoods are rice technology, population, wage, and other factors.
farmers. In addition, rice production may also be Therefore, in this study, to facilitate the modeling
affected by factors such as land area, rice price, build, we used variable of human capital and
labor, wage rate, and use of modern technology urbanization are assumed to change the quantity
(Azwardi et al., 2016; Koirala et al., 2013). of rice production and consumption. The objective
Meanwhile, the economic development in of this study is to identify factors that influence
the future will increase of the human capital, rice production and consumption, especially
while in some the literature assumes that human to see how the influence of human capital and
capital can to changes production pattern and urbanization on rice production and consumption
consumption because the development of human in Indonesia.
capital investment in the developing countries
will provide an economic return by increasing both 2. Research Methods
the employment rate and labor income (Huffman, The focus of this study is the identifying
2000; and Huffman & Orazem, 2007). On the determinants of rice production and consumption

in Indonesia from 1990-2014, the data used is unit root test, assuming βi to be heterogeneous
secondary obtained from the Central Bureau of across the passages. The IPS unit root test tests
Statistics (BPS) in various editions. the null hypothesis of null hypothesis βi=0 against
The dependent variables used by rice alternative hypothesis βi<0, (i=1, ..., N1); βi=0,
production (QR) and rice consumption per (i=N1, ..., N) for all i. Acceptance of alternative
capita (CRP), while those used as independent hypotheses enables individual series to be
variables include: per capita income (GDPC); integrated. The root test of the LLC and IPS units
human capital (HC); population (POP); urban can be estimated on the data of level and for the
population (URB); labor (L), wage level (WF); rice first difference in the form of natural logarithms.
price (PRR); wetland area (LA); and agricultural The next step is after testing the model of
technology (T). The method of analysis using the regression equation transformed into natural
quantitative approach with the multiple linear logarithm using OLS estimator, then testing the
regression models in estimation with ordinary violation of classical assumption in the model, as
least square (OLS). for diagnostic test on the model such as testing of
Before estimating the linear regression data normality, autocorrelation, multicollinearity,
model using time series, it is necessary to test and heteroscedasticity (Gujarati, 2004). This
whether the variable data used is stationary or study uses two models, (i) regression equation
not stationary, test the data stationary with using model of rice production and (ii) rice consumption
unit root test with Augmented Dickey-Fuller per capita model. The model of regression equation
Test criteria (ADF-Test) which was introduced can be presented as follows:
by Dickey & Fuller (1979), and another similar
test of Phillips-Perron (PP) Test introduced a. Model of rice production
by Phillips & Perron (1988). Further testing The specification of the rice production
was re-developed by Levin, Lin, & Chu (2002) model in this study refers to the production
hereinafter referred to LLC, and by Im, Pesaran, function of Cobb-Douglas (Felipe & Adams, 2005),
& Shin (2005) hereinafter referred to as IPS. The and several other studies such as Antle (1984);
equation of unit root test of LLC by considering Azwardi et al. (2016); Kea, Li, & Pich (2016);
the criteria of ADF as follows: Koirala et al. (2013); Shaikh & Ahmed (2016).
(1) (2)
where: Yt is the vector of the main endogenous Equation (2) above is adapted from the
variables in the study of rice production and con- production function of cobb-Douglas which is a
sumption. non-linear model form, where Qt is the production
Unit root test of LLC assumes that the of rice; K is human capital; L is labor; and Z is
accuracy of β1 parameter is identical across the another variable that affects the rice production.
passage (i.e, β1 = β for all i), whereas the order of Whereas β0, β1, β2 ..., βn is the parameter coefficient;
lag β1 can freely vary. This procedure tests the null and u is the error rate (error term). Equation (3)
hypothesis β1=0 for all i against the alternative is a function of rice production.
hypothesis β1<0 for all i. The rejection of the null
hypothesis shows the possibility of continuing the (3)
process of integration of time series data and vice
versa. Equations (2) and (3) are transformed into
While the IPS unit root test, which is also a natural logarithm, while the linear regression
based on equation (1), is different from the LLC equation (4) model is presented as follows:

lnQRt=β0+β1lnHCt+β2lnLt+β3lnLAt+β4lnWFt slope coefficient value is actually a measure

+β5lnPRRt+β6lnURBt+β7lnTt+μ1t (4) of the elasticity of Y against X, in other words,
slope coefficient is the rate of change in variable
where: QR is the rice production; L is labor; LA is Y (percent), if there is a change in variable X, Z
the wetland area; WF is the wage rate; PRR is the (percent).
rice price; HC is human capital; URB is the vil-
lage population; and agricultural technology (T). 3. Result and Discussion
Economic development in Indonesia is
b. Model of rice consumption inseparable from the role of the agricultural sector.
The model specification of rice consumption As an agricultural country, approximately 40%
in this study refers to a study conducted by of Indonesians depend on agricultural products.
Azwardi et al. (2016); Fakayode et al. (2010); The agricultural sector has a very big role in
Micheal (1972); and Wohlgenant & Hahn (1982). terms of providing employment, food providers,
foreign exchange contributors through exports
Yt=αoXα1 Zαn εu (5) and so on. Several studies have found that the
agricultural sector is the engine of growth both
where: Y is the demand for rice; X is the price of in terms of supply of raw materials, food, and
rice; Z is another variable affecting rice demand; as input power for products produced by other
α0, α1, ..., αn is the parameter coefficient; and u is sectors (Apostolidou, Kontogeorgos et al., 2014;
the error rate (error term). The above model is a Tiffin & Irz, 2006). Naturally, economic growth
non-linear model. Simply can be formed with the must be supported by the development of a strong
function as presented in equation (6) at this fol- agricultural sector both in terms of supply and
lows: demand.
The role of the government at this time
CRPt=f(PRRt,GDPCt,POPt,HCt,CRPt-1) (6) is very important because to avoid a crisis in
the agricultural sector, the government must
Equation (6) above is a function of rice intervene with agricultural policy (agricultural
consumption per capita (CRP) that is influenced policy). Government policies related to domestic
by other factors, such as rice price (PRR); per rice production include price policy and input
capita income (GDPC); population (POP); human and output trade, which in principle aims to
capital (HC); lag of rice consumption per capita strengthen or enhance the competitiveness of the
(CRPt-1). To estimate the model, the equations (5) commodities concerned in the domestic market
and (6) are transformed into natural logarithms, (Azwardi et al., 2016).
while the linear regression equation model is Indonesia ranks third after China and
presented in equation (7) below: India are able to produce large quantities of rice
(Table 1). On the other hand, rice imports are still
lnCRPt=α0+α1lnPRRt+α2lnGDPCt+α3lnPOPt carried out by the government for food stocks to
+α4 lnHCt+α5lnCRPt-1+ε2t (7) supply some of the areas lacking. In addition, rice
imports are also expected to maintain rice price
Equation (7) shows the transformed model stability. On the other hand, rice consumption is
to be natural logarithms. One of the advantages also quite high, because rice is the main food in
of the logarithm model is the slope coefficient Indonesia, the high consumption of rice is also
α0, α1,..., αn in the logarithmic model, since the caused by a large number of populations.

Source: BPS, Statistics Indonesia, various editions (processed)

Figure 1. The trend of rice production and consumption in Indonesia, 1990-2014
Note: The map of the location of the region as the largest producer of rice production in Indonesia, No 1. West
Java province; No 2. East Java; No. 3 Central Java; No. 4 South Sulawesi; No. 5 North Sumatra; and No. 6
South Sumatra. The rating is determined based on contribution to total rice production in Indonesia.
Source: BPS, Statistics Indonesia (Authors calculation)
Figure 2. The Map of market share of the six biggest provinces of rice production
Generally, the development of rice production factors, such as land area, the number of labor,
and consumption in Indonesia has indicated a and the more modern technology.
positive trend, although the amount of national Rice production in Indonesia is dominated
rice consumption has decreased in 2014 compared by small farmers, not by large companies
to 2013, the condition is inversely proportional owned by private or state. These smallholders
to decreased production in 2013 (Figure 1), the contribute about 90% of the total rice production
average grows almost about 1.75% and 1.78% in Indonesia. In addition, the average land area
respectively. In 2014 rice production recovers, in each farmer’s work is less than 0.8 hectares.
with the government’s policy to eliminate energy There are six regions as rice production centers,
subsidies and increase non-energy subsidies such as Central Java, South Sumatera, North
(Azwardi et al., 2016). In addition, the development Sumatera, East Java, West Java, and South
of rice production can also be influenced by many Sulawesi.

Rice production in Indonesia is quite large com- unit root test results using the ADF test after the
pared to other countries in the world, but when first-order differentiation process.
compared with the population is still very little, The results of the ADF test compared
almost every year rice production in Indonesia with the critical value of McKinnon. If the ADF
has a deficit. This indicates that the productivi- t-statistic value is less than the critical value of
ty of farmers in Indonesia is still very low. Many McKinnon, then the data is not stationary, and
factors that cause such low productivity such as vice versa if the ADF t-statistic value is greater
the grain price and low wages, and wetland area than the critical value of McKinnon, then the
that have not been productive. In addition, rice data is stationary. Unit root test at first difference
production can also be caused from other factors result indicated that all variables in this study
such as seeds used and dry land structures. were stationary at 1% significance level (Table 3).
In Figure 2 above, there are 6 (six) provinces This means that all variables in this study can
as the main centers of rice production in Indonesia, be used for time series analysis and predefined
the average contribution of six regions to total model equations.
rice production in the period 1990-2014, among Furthermore, the diagnostic test of multiple
others, West Java with a contribution of 27% East regression equation models for rice production
Java (25%), Central Java (23%), South Sulawesi (model-1) and consumption (model-2), Table 3
(10%), while in Sumatera Island, North Sumatera shows the results of autocorrelation test based on
and South Sumatra with 9% and 6% contribution Jarque-Bera criteria indicates that the probability
of rice production respectively. But the production of Jarque-Bera (JB)> 0,05, it can be concluded that
is not proportional to the population’s demand for the residual is normally distributed (Table 4). In
rice. This needs to be a serious concern for the addition, heteroscedasticity test with Breusch-
government, as rice needs in Indonesia continue Pagan criteria showed that the probability of
to increase, but on the other hand rice production X2>0.05, it can be concluded that there are no
is growing slower than consumption. Government symptoms of heteroscedasticity in the model. The
policy in Indonesia is currently focused only on next assumption test is autocorrelation with the
the production side. On the other hand, the price Breusch-Godfrey criterion indicating that there
of grain at the farm level is low. Table 2 shows the are no autocorrelation in the model (Table 4).
Table 3. Result of unit root test: at level & first differences

ADF McKinnon Critical Value
Variable t-statistics ADF Unit Root Test
1% 5% 10%
D(lncrp) -4.475353 -3.752946 -2.998064 -2.638752 **stationary
D(lngdpc) -7.012405 -3.752946 -2.998064 -2.638752 **stationary
ln(hc) -12.51526 -3.737853 -2.991878 -2.635542 *stationary
ln(la) -4.898977 -3.737853 -2.991878 -2.635542 *stationary
ln(pop) -8.119575 -3.737853 -2.991878 -2.635542 *stationary
D(lnprr) -5.378061 -3.788030 -3.012363 -2.646119 **stationary
D(lnqr) -4.061621 -3.752946 -2.998064 -2.638752 **stationary
D(lnrur) -4.537528 -3.769597 -3.004861 -2.642242 **stationary
D(lnwf) -4.440279 -3.752946 -2.998064 -2.638752 **stationary
Note: stationary at sign: *level: Max-lag =1, **first differences: Max-lag = 2, Test critical values at 1% level
Source: Authors calculation

Table 4. Result of model diagnostic tests

Diagnostic Test Model-1 Model-2 Note
Normality Jarque-Bera 0.6001>0.05 0.9188>0.05 Reject Ho
Heteroscedasticity Breusch-Pagan 0.6124>0,05 0.5244>0.05 Accept Ho
Autocorrelation Breusch-Godfrey 0.0664>0.05 0.1191>0.05 Accept Ho
Table 5. Examination of correlation matrix of rice production model

lnl lnwf lnla lnhc lnprr lnurb
lnwf 0.498 - - - - -
lnla 0.204 0.139 - - - -
lnhc 0.455 0.497 0.132 - - -
lnprr 0.472 0.481 0.101 0.581 - -
lnurb 0.480 0.678 0.097 0.675 0.685 -
lntec 0.068 0.514 0.140 0.550 0.613 0.583
Table 6. Examination of correlation matrix of rice consumption model

lnprr lngdpc lnhc
lngdpc 0.584 - -
lnhc 0.481 0.692 -
lnpop 0.585 0.594 0.697
Table 5 presents the results of correlation model (model-1) it is seen that human capital
test between independent variables indicating affects rice production significantly at 1% level,
that all coefficient values are still within the the sign of the coefficient shown is positive, it
tolerance limit that is below 0.80 (Gujarati, means that as the level of individual education
2004), which means the relationship between (human capital) improvement of individual
independent variables is not strong enough, productivity, meaning that education level in this
so it can be said that there is no symptom of case is very important in pushing rice production
multicollinearity in rice production model. more efficient, the results are also in line with
Furthermore, the multicollinearity test using the the studies undertaken by Chen, Huffman, &
correlation matrix for the rice consumption model Rozelle (2003) dan Ekou (2015). Of course the use
shows that the relationship between independent of inputs used by farmers is generated from the
variables does not have a strong relationship. The development of increasingly modern technology.
correlation coefficient between these variables is Furthermore, rice production is also significantly
still below the value of 0.80, so it can be concluded influenced by the number of labor, wages, rice
that there is no symptom of multicollinearity in field area, urban population, and rice price, the
the rice consumption model (Table 6). signs of each coefficient of the indicated variables
are positive. These five factors have a coefficient
3.1. Analysis of rice production model of each 0.116; 0.615; 0.237; 0.670; and 0.101.
In Table 7, we present the model estimation However, technological factors have no effect on
of rice production and consumption using OLS rice production.
estimator. In the estimation of the rice production

Table 7. Result of model estimation

Variable Description Model-1 Model-2
147.4499*** 118.9975***
c Constant
(39.16265) (37.52190)
0.215948*** -0.762767***
lnhc Human capital
(0.064375) (0.084305)
0.115963**
lnl labor of agriculture sector
(0.090176)
0.614589**
lnwf Wage of agriculture sector
(0.121971)
0.237636*
lnla Wetland area
(0.124356)
-0.670057**
lnrur Urban population
(0.209510)
0.084419
lnt Technology
(0.045996)
0.101692** 0.016191
lnprr Price of rice
(0.048571) (0.035325)
0.102811**
lngdpc Income per capita
(0.047525)
0.7935079***
lnpop Population
(0.095940)
0.016094***
lncrp (-1) Lag rice consumption
(0.006390)
R2 0.968437 0.846711
Adj-R 2
0.955441 0.804130
F-stat 74.51559 19.88502
Prob(f-stat) 0.000000 0.000001
Note: *indicates significant at 10%, **significant at 5%, and *** at 1%
In Table 7, from the model estimation results (2012).

show that statistically show that if the factor In addition, the wetland area is one of the
of the number of labor increased 1%, then in a factors driving rice production in Indonesia,
year can encourage rice production increased by from the regression estimation results indicating
0,116%. In Indonesia, labor is a major factor in that if the width of rice field area increased by
increasing rice production in rural areas, as most 1 hectare, it will encourage rice production to
of the livelihoods of Indonesians are farmers. On increase by 0.237% in a year. It is also supported
the other side, the wage factor is a major factor by soil conditions in Indonesia, which mostly have
in improving the productivity of farmers, in other alluvium soils that result from erosion deposited
words, if wages increase by 1%, it will encourage in the lowlands to be an excellent support factor
farmers’ productivity to encourage rice production for rice crops. Furthermore, the factor of urban
to increase by 0.615% in a year. It’s in line with population becomes one of the factors that can
the study Bagamba, Burger, & Kuyvenhoven influence rice production (Bren d’Amour et al.,
(2007); Edriss, Tchale, & Wobst (2004); Llanto 2016; Satterthwaite et al., 2010), statistically, if

urban population increase by 1%, it will directly rice price does not really affect rice consumption
decrease rice production by 0,670% in a year. The in Indonesia, this is understandable due to the
phenomenon that occurred in the last few decades, supply side, the availability of rice stock, will not
the number of villagers increasingly decreased, change rice price significantly, hence not too much
meaning that the process of urbanization that impact to changes of rice consumption. As stated
occurred in Indonesia increasingly significant, from the results of the study by Nuryanti (2005)
there are two factors causing the urbanization which states that rice prices are more affected by
process among other: economic and non-economic rice supply.
factors (Turok & McGranahan, 2013). Economic Statistically, the human capital has a
factors, among others: (1) limited resources such negative effect on rice consumption, with a
as agricultural land, and low wage rates in the coefficient of -0.762, meaning that if human
village. While non-economic factors, among capital increases one level, it will decrease rice
others: (1) social factors; (2) physical factors such consumption by 0.762% in a year (Table 7). It
as climate and natural disasters; (3) demographic also means that the higher the education level
factors; (4) cultural factors; and (5) infrastructure of a person, the individual will reduce his rice
factors such as transportation facilities, education consumption and switch to other food consumption
systems, and telecommunications (Turok & choices. Along with the current technological
McGranahan, 2013). advances, the Indonesian government also
On the other side, our findings show that encourages the diversification of food, which is
statistically that technology usage has no effect on intended so that people are not fixated on one
rice production significantly. It’s means that the type of staple food and driven to consume other
use of agricultural technology in Indonesia is still foodstuffs as a substitute for the staple food that
low, the farmers in Indonesia still use traditional has been consumed. Indonesia has a variety of
technology, in addition, the farmers in Indonesia agricultural products that can actually be used
are mostly able to cultivate rice only twice per as staple foods such as breadfruit, sweet potato,
year, because of inadequate irrigation systems taro, etc. That can be a major supporting factor of
and poor water management. Even though, were food diversification. Diversification of food is one
previously able to plant paddy three times per way to achieve self-sufficiency in rice by reducing
year. The rice production model in the study also rice consumption so that total consumption not
enter the rice price factor, and the results show exceeding production.
that price developments have a significant effect Meanwhile, the per capita income indicated
on rice production in Indonesia, statistically a positive sign, per capita income has a coefficient
indicating that if the price of rice increases by value of 0.102, which means that if per capita
1%, it will increase rice production by 0.101% in a income increases by 1%, then rice consumption will
year. Fluctuations in rice prices can be caused by increase by 0.102% (Table 7). In microeconomic
many factors such as rice consumption, rice stock, theory, the relationship that is justified because
and population (Reyes et al., 2009; Rosegrant & when the income increases then consumption will
Sulser, 2002). also increase (Mas-Colell, Whinston, & Green,
1995). Likewise with the variable population,
3.2. Analysis of rice consumption model the results of the model’s estimation indicated
In the rice consumption model, the estimation for the population on rice consumption also has a
results indicated that rice consumption is positive sign, which is shown from the coefficient
influenced by human capital, per capita income, value of 0.793, which means that if the population
population and consumption of the previous year increases by 1%, then the rice consumption will
significantly. However, on the other side, the increase 0.793% in a year. In many studies,

changes in population have always been one of rice consumption in Indonesia. Statistically,
the factors that will influence changes in other the coefficient sign shows a negative sign for
economic variables, such as in microeconomic human capital, whereas the per capita income,
theory, changes in the population become one of population, and the previous year consumption
the factors that will affect the demand quantity showed a positive sign. The implication of this
(Mas-Colell, Whinston, & Green, 1995). In study is that the policy of output price (rice) does
addition, from the estimated result indicated also not cause disruption of market stability, and
that the previous year’s rice consumption also demand for rice is relatively stable, meaning that
affected the current rice consumption, which is rice price policy is quite safe to be implemented.
shown from the coefficient value of 0.016 (Table The study using multiple regression equation
7), meaning that when the previous year’s rice models for the rice supply and demand system
consumption increased by 1%, it will increase the in Indonesia has been able to evaluate long-term
current rice consumption by 0.016% the results of effects. That is, this method can be implemented
the study are in line with the study by Malian et for similar studies on agricultural commodities
al. (2004). and non-agricultural commodities.
4. Conclusions 5. Acknowledgment
The aims of this study are to estimate rice This study is a part of the grand project
production and consumption in Indonesia and “Hibah Penelitian Unggulan Kompetitif.” We
determine the main factors that influence it by thank Universitas Sriwijaya for financial support
using multiple linear regression models with of this research through “Hibah Penelitian
OLS estimators. This study uses 24 years data, Unggulan Kompetitif 2017, contract Number:
the data obtained from the Central Bureau 988/UN9.3.1/PP/2017.
of Statistics “Statistics Indonesia” in various
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Identifying factors inﬂuencing rice production and consumption in Indonesia

Article · January 2019

Abdul Bashir Saadah Yuliana

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Identifying Factors Influencing Rice Production and

Faculty of Economics, Universitas Sriwijaya, Indonesia

Recieved: March 2018 | Revised: July 2018 | Accepted: November 2018

1. Introduction Increasing rice food security is a key

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Table 1. The five biggest rice producing countries in the world

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Table 2. Data and data source

Variable Description Unit Source

QR Rice production tons Indonesia Statistics (BPS)

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lnQRt=β0+β1lnHCt+β2lnLt+β3lnLAt+β4lnWFt slope coefficient value is actually a measure

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Source: BPS, Statistics Indonesia, various editions (processed)

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Table 3. Result of unit root test: at level & first differences

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Table 4. Result of model diagnostic tests

Table 5. Examination of correlation matrix of rice production model

Table 6. Examination of correlation matrix of rice consumption model

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Table 7. Result of model estimation

In Table 7, from the model estimation results (2012).

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Huffman, W. E. (2000). Human Capital, org/10.1016/S0304-4076(01)00098-7

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185 Jurnal Ekonomi Pembangunan, ISSN 1411-6081, E-ISSN 2460-9331

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