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

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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Bibliographic Details
Main Authors:	Nose, Manabu, Yamauchi, Futoshi
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	World Bank, Washington, DC 2012-05
Subjects:	AGENCY COSTS, AGRICULTURAL ACTIVITY, AGRICULTURAL DEVELOPMENT, AGRICULTURAL ECONOMICS, AGRICULTURAL INPUTS, AGRICULTURAL LAND, AGRICULTURAL PRODUCTION, AGRICULTURAL PRODUCTIVITY, AGRICULTURAL PRODUCTS, AGRICULTURAL SECTOR, AGRICULTURAL TECHNOLOGIES, AGRICULTURE, ASSET HOLDINGS, BEVERAGES, BINDING CONSTRAINT, CACAO, CAPITAL INTENSITY, CAPITAL INVESTMENT, CAPITAL STOCK, CASH FLOW, CASSAVA, CHANGES IN POVERTY, CIVIL WAR, COCOA, COLLATERAL, COMMODITIES, COMMODITY, COMMODITY PRICE, COMMODITY PRICES, CONNECTIVITY, CONSUMER PRICE, CONSUMER PRICE INDEX, CREDIT CONSTRAINTS, CROP PRODUCTION, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DISPOSABLE INCOME, DOMESTIC MARKET, ECONOMIC SHOCKS, EFFECT OF LIQUIDITY, EGGS, EXPENDITURE, EXPENDITURES, EXPOSURE, EXPOSURES, FACTORS OF PRODUCTION, FARM EFFICIENCY, FARM SIZE, FARMER, FARMERS, FARMING ACTIVITIES, FINANCIAL ASSETS, FINANCIAL MARKETS, FINANCIAL SUPPORT, FLOUR, FOOD COMMODITIES, FOOD CONSUMPTION, FOOD CROP, FOOD EXPENDITURE, FOOD EXPENDITURES, FOOD POLICY, FOOD POLICY RESEARCH, FOOD PRICE, FOOD PRICE INFLATION, FOOD PRICES, FRUITS, FUTURE PRICE, FUTURE PRICES, GA, HOUSEHOLD HEAD, HOUSEHOLD SIZE, HOUSEHOLD WELFARE, HUMAN CAPITAL, INCOME, INCOME GAINS, INCOME INEQUALITY, INCOME SHOCK, INCOME SHOCKS, INFRASTRUCTURE PROJECTS, INSURANCE, INTEREST RATE, INTERNATIONAL COOPERATION, INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE, INVESTMENT DECISION, INVESTMENT DECISIONS, IRRIGATION, LAND ASSET, LAND PRODUCTIVITY, LAND SIZE, LANDHOLDING SIZE, LIQUID ASSETS, LIQUIDITY, LONG-TERM INVESTMENT, LOW-INCOME COUNTRIES, MAIZE, MARKET INTEGRATION, MARKET STRUCTURES, MARKETING, MEAT, MILK, NATURAL DISASTERS, NUTRITION, OUTPUT, OUTPUTS, PADDY, POLITICAL ECONOMY, POOR FARMERS, POOR HOUSEHOLDS, PORTFOLIOS, POTATO, PRICE CHANGE, PRICE CHANGES, PRICE EFFECT, PRICE INCREASE, PRICE INCREASES, PRICE INFLATION, PRICE LEVEL, PRICE LEVELS, PRICE UNCERTAINTY, PRODUCER PRICES, PUBLIC POLICY, PURCHASING, REGIONAL DISPERSION, REGIONAL DUMMIES, REGIONAL VARIATION, REMOTE AREAS, RISK PREMIUM, RUBBER, RURAL AREAS, SAVINGS, SCHOOLING, SMALL FARMERS, SUBSTITUTION, SUBSTITUTION EFFECT, TRANSACTION COSTS, VEGETABLE CROPS, VEGETABLES, VILLAGE LEVEL, VOLATILITIES, VOLATILITY, WHOLESALE PRICE,
Online Access:	http://documents.worldbank.org/curated/en/2012/05/16259979/long-term-impacts-global-food-crisis-production-decisions-evidence-farm-investments-indonesia http://hdl.handle.net/10986/9356
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