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Abstract
Rice is Indonesia’s staple food and accounts for large shares of both consumers’ budgets
and total employment. Until recently, Indonesia was the world’s largest importer, but
rice import policy is now highly protectionist. Since early 2004, rice imports have been
officially banned. Advocates of this policy say it reduces poverty by assisting poor
farmers. Opponents say it increases poverty, stressing negative effects on poor consumers.
This paper uses a general equilibrium model of the Indonesian economy to analyse the
effects of a ban on rice imports. The analysis recognises 1000 individual households,
including allmajor socioeconomic categories, disaggregated by expenditures per person.
It takes account of effects on each household’s real expenditure and its income, operating
through wages and returns to land and capital. The results indicate that the rice import
ban raises the domestic price of rice relative to the import price by an amount equivalent
to a 125 per cent tariff, six times the pre-2004 tariff. Poverty incidence rises by a little
under 1 per cent of the population and increases in both rural and urban areas. Among
farmers, only the richest gain. These results are qualitatively robust to variations in key
parametric assumptions.