HomeDLSU Business & Economics Reviewvol. 27 no. 2 (2018)

Analysis of Food Demand Elasticity of Rice for the Poor in Aceh, Indonesia: An Almost Ideal Demand System Approach

Diana Sapha Suriani A.h | Cut Zakia Rizki | M. Shabri Abd. Majid



Abstract: The purpose of this study is to empirically explore the effect of rice for the poor (Raskin) or subsidized rice consumption on the food demands elasticity of poor households. The study utilizes the primary data collected in 2015 based on the purposive sampling method for establishing the homogeneity characteristics of Raskin beneficiary’s households. An Almost Ideal Demand System approach is adopted to measure the proportion of food commodities expenditure of the poor and the demand elasticity as well as their responses to the income elasticity. Additionally, the correlation analysis is utilized to investigate the relationship between the selected socioeconomic variables and expenditure of the poor households. Apart from the Raskin, five other food commodities were also investigated, comprising rice, meat, fish, milk, and eggs. The study found that the highest proportion of the expenditures of the poor households was spent for the rice, while the lowest one was spent for milk. The highest coefficients of price and income elasticity were documented for Raskin, while the lowest ones were for the milk. The poor households were highly dependent on the Raskin although it has a lower quality, implying the Raskin as the superior good. Finally, the study found that the proportion of expenditures for each food commodity by the poor related significantly to the number of dependents, income, and their aggregate expenditure. These findings showed that the Raskin has ensured the fulfillment of the rice as one of primary needs of the poor in Aceh, Indonesia.