The Responsiveness of Rice Area to Price and Production Costs in Jambi

Abstract

Ordinary least squares and seemingly unrelated regression procedures were used to analyze the impacts of changes in rice prices and production costs on Jambi rice planted area. Regional response models were estimated over the 1986-2013 period. Supply-inducing prices of rice were estimated as a function of effective rice support prices and average market prices. Expected production costs per hectare were estimated using lagged actual total variable cash production expenses per hectare. Estimated short-run price and production cost elasticity were found to be inelastic at the regional level. However, the magnitudes of the production cost elasticity were found to be greater than the price elasticity. Estimated longrun elasticity at the Jambi level was inelastic for changes in price but elastic for changes in production costs. Although area response varied across regions, similar relationships were found between price and production cost elasticity.