Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)


Market Structure, Distribution, and Rice Farmer's Welfare in Indonesia: Fixed Effect Model (FEM) through Hausman Test

Author(s): Maal Naylah, Suryani Nurfadillah and Cahyaningratri

Farmers’ welfare should be a top priority for national development because the agricultural sector is the sector that absorbs the most labor. The study aimed to analyze farmers’ welfare, the rice market structure, and analyze whether the price of grain, price disparity, household consumption index, and trade and transportation margins significantly affect rice farmers’ welfare in Indonesia. Farmers’ welfare as measured by farmers’ exchange rate in each province in Indonesia from 2016 to 2018. The concentration ratio value (CR) determines rice market structure. In comparison, the determinant of farmers’ welfare such as the price of harvested dry grain, price disparity, household consumption index, also trade and transport margins was analyzed by panel data regression analysis. The results showed that the welfare of Indonesian rice farmers was still relatively low. The market structure for rice commodities was in the form of moderate concentration oligopsony. The increase in rice prices at the consumer level cannot be transmitted proportionally to farmers due to the less competitive market structure of the two markets. The regression results confirmed that the price of harvested dry grain (GKP) at the farm level, the price disparity, and the trade and transport margins (MPP) significantly affected the farmers’ welfare. However, the household consumption index (IKRT) not significantly influenced the farmers’ interest. The novelty of this research was using price disparity variables and trade and transportation margins as proxies of market structure and distribution will then affect the farmer’s welfare.

Get the App