The Linkages between Hard Infrastructure, Poverty Reduction, and Rice Prices

Abstract

Eradicating poverty and hunger has been an important consideration of every government administration in Indonesia since 1945, from the era of President Soekarno to Joko Widodo. Hard infrastructure development is the priority of the current Indonesian Government, aiming to trigger local economic activities, particularly in rural areas. However, at the same time, hard infrastructure development has also triggered housing and industrial estate development that has converted rice fields in Java Island to built-up areas, thereby reducing rice production which is a significant component of food security in Indonesia. Therefore, it is important to explain the effect of infrastructure in Java Island on poverty and analyse the causality between hard infrastructure, poverty indicators and rice prices (representing productivity and affordability of food). Spatial regression was used to formulate the effect of hard infrastructure (roads, clean water, and electricity) on poverty (headcount index, poverty gap index, poverty severity index, and human poverty index). To evaluate the links between infrastructure and poverty to local rice price, path analysis was used in this research. The results of the analysis can be used to propose better strategies for infrastructure development which is targeted to reduce poverty and maintain rice prices at acceptable levels.

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