DETERMINANT OF RICE CONSUMPTION: EVIDENCE FROM PANEL DATA IN INDONESIA

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International Journal of Mechanical Engineering and Technology (IJMET)
Volume 10, Issue 05, May 2019, pp. 160-168. Article ID: IJMET_10_05_016
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJMET&VType=10&IType=5
ISSN Print: 0976-6340 and ISSN Online: 0976-6359
© IAEME Publication
DETERMINANT OF RICE CONSUMPTION:
EVIDENCE FROM PANEL DATA IN INDONESIA
Corryati Wardani*
Ph.D Candidate on Agricultural Science Study Program, Gadjah Mada University,
Yogyakarta, Indonesia
Directorate General of Agricultural Infrastructure and Facilities, Ministry of Agriculture of
the Republic of Indonesia, Jakarta, Indonesia
Jamhari, Suhatmini Hardyastuti, Ani Suryantini
Departement of Agricultural Socio-Economics, Faculty of Agriculture, Gadjah Mada
University, Yogyakarta, Indonesia
* Corresponding Author
ABSTRACT
Rice is the main staple food for the population of Indonesia. Although people in
several provinces such as Papua and Maluku initially consumed staple foods other than
rice such as sago and tubers, they are currently switching to consuming rice. Rice
demand for consumption in Indonesia is increasing with the increasing population. This
study aims to determine the dynamics of rice consumption and its determinants in
Indonesia. The data used are data originating from the Central Bureau of Statistics and
the Ministry of Agriculture, which includes data from 33 provinces in the period 2010-
2018. The data was analyzed using panel data regression analysis with the selected
model fixed effect model on the equality of functions of rice consumption in Indonesia.
The results of the analysis show that rice consumption in Indonesia influenced by the
number of households, rice prices, cooking oil prices, chicken prices, participation in
rice consumption, age and social assistance. Price elasticity and income elasticity is
inelastic, but income elasticity not statistically significant. There are indications that
food diversification is happening, can be seen from consumption decline due to social
assistance which provides alternative choices of consumption.
Keywords: Rice Consumption, Panel Data, Fixed Effect Model.
Cite this Article: Corryati Wardani, Jamhari, Suhatmini Hardyastuti and Ani
Suryantini, Determinant of Rice Consumption: Evidence from Panel Data in Indonesia,
International Journal of Mechanical Engineering and Technology, 10(5), 2019, pp.
160-168.
http://www.iaeme.com/IJMET/issues.asp?JType=IJMET&VType=10&IType=5

Corryati Wardani, Jamhari, Suhatmini Hardyastuti and Ani Suryantini
1. INTRODUCTION
Rice is the main staple food for the population of Indonesia [1], [2] as well as the dominant
carbohydrate source with a proportion of more than 89.20% consumption of carbohydrate
sources [3]. The participation of rice consumption in Indonesia during 2011-2015 reached an
average of 99.39%, meaning that 99.39% of the Indonesian population consumes rice, with an
annual rice consumption rate of 95.9 kg [4]. Rice meets 47.22% of the average total energy
consumed by the Indonesian population of 1,994 Kcal/capita/day [4]. In addition, 20 million
households in rural areas rely on jobs in rice farming [1], and accounts for 18.8% of the total
value of agricultural production in Indonesia [5].
The pattern of staple food that is variously base on local food has occurred since long ago
[6], such as sago and tubers are consumed by many people in Papua and Maluku, and corn
consumed by people in East Nusa Tenggara. However, because of government policies in the
field of rice in the context of overcoming poverty are carried out intensively from upstream to
downstream industries it's resulting in a shift in staple food from local foods such as corn and
tubers into rice that occurs at all income levels, from the poor to wealthy society [7], [8].
The amount of consumption will encourage food demand increased. The main base in
calculating food demand is the population and growth rate [9], [10]. Whereas the determinant
of changing demand for staple foods, especially rice, is population growth, per capita income,
and changes in prices relative to substitute food [11], [12]. Indonesia's population growth rate
is 1.38% per year [13], and the population will continue to increase so that the total population
of Indonesia in 2035 estimated at 305.6 million. If the annual rice consumption per capita level
is 95.9 kg, it will need at least 29.31 million tons of rice.
The need for rice for domestic consumption needs adequate availability. If domestic rice
production is not sufficient, the dependency of rice imports will increase, and food security will
be difficult to reach. On the other hands, rice is the staple food of the population in Asia, parts
of Africa even for almost half the world's population [11], [14]–[16]. The condition is facing a
reduced world supply [17], so that causes a serious problem to people in the world, including
Indonesia, that is the world food crisis because of its dependency on imports [1].
Paddy production in Indonesia reached 83.04 million tons or 51.87 million tons of rice
equivalent. The production increased by 24.93% if compared by 2010 that produced of 66.47
million tons or 41,52 million tons of rice equivalent. Its means that Indonesia's rice production
growth 2.82% per year during the period 2010-2018. A fairly good. However, in the period
2010-2017 Indonesia still imported rice from various countries totaling 9.015.312,5 tons with
a growth of -0.96% per year [18], [19], the amount is quite large even though rice imports are
considered a waste of foreign exchange for rice producing countries that have comparative
advantages [20].
For this reason, an understanding of the dynamics of rice consumption in Indonesia with
various factors that determine it such as price, income, population, tastes, and others is very
important for policy making in the context of handling consumption and safeguarding the
supply of rice for the demand consumption of the population.
2. MATERIALS AND METHOD
2.1. Data
The data are time series data in the period 2010-2018 originated from 33 provinces which are
combined as panel data. Data collected from the Central Bureau of Statistics and the Ministry
of Agriculture of the Republic of Indonesia includes data related to population, prices of food
commodities, income and other relevant data.

Determinant of Rice Consumption: Evidence from Panel Data in Indonesia
The advantage of using panel data [21] is increased in degree of freedom as an implication
of used larger amounts of data, reduces collinearity between independent variables and able to
analyze economic questions that cannot be explained by used cross-section data or time series
data. Another advantage of panel data is that it is robust against several types of violations of
the assumptions of the Gauss Markov, namely heteroskedasticity and normality [22], besides
being able to eliminate the problem of multicollinearity [23].
2.2. Study Area
Research based on the territory of the Unitary Republic of Indonesia, covering 33 provinces
with a total area of Indonesia reaching 1,916,862.20 km2, as shown in figure 1.
Figure 1 Map of Indonesian Territory
Source: Geospatial Information Agency
2.3. Data Analysis
This research is descriptive analysis with a quantitative approach to determine the factors that
influence rice consumption in Indonesia. The own price, income and price of a substitute are
the determinants of demand in the classical theory of consumer behavior, so that we used the
theory to analyze the determinant of rice consumtion in Indonesia. According to the research
objectives, the analysis was carried out by estimating the consumption function using panel
data regression with the following model:
LnRC = β0 + β1LnHH + β2LnPDRB + β3LnPRice + β4LnPCorn + β5LnPCass + β6LnPCO +
β7LnPCM + β8LnPEgg + β9LnPWheat + β10Part + β11LnEduc + β12LnAge + β13DRastra_BPNT + ε
Dengan
RC = Rice Consumption (Ton)
HH = Number of Households (Household)
PDRB = Gross Regional Domestic Product on Household Expenditures (Billion IDR)
PRice = Rice Price (IDR/Kg)
PCorn = Corn Price (IDR/Kg)
PCass = Cassava Price (IDR/Kg)
PCO = Cooking Oil Price (IDR/Lt)
PCM = Chicken Meat Price (IDR/Kg)
PEgg = Egg Price (IDR/Kg)
PWheat = Wheat Price (IDR/Kg)
Part = Rice Consumption Participation (%)
Educ = Duration of Education Taken, Wieghted (Year)
Age = Age, Weighted (Year)

DRastra_BPNT = Dummy Social Assistance
ε = Error
3. RESULTS AND DISCUSSION
3.1. Dynamics of Rice Consumption
3.1.1. Population
In 2010-2018 the population of Indonesia average growth 1.33% per year, with a balanced
composition between men and women. In general, the population of Indonesia in 2018 is
dominated by residents 0-29 years, reaching 51.20% of the total population of Indonesia. The
average age of 2018 is 32.62 years with a life expectancy of 71.11 years. The population
composition of 2018 describes an expansion pyramid, widening at the bottom and convex in
the middle as a feature of the dominance of young people, shown as figure 2.
Figure 2 Population By Age And Sex In Indonesia in 2018
Source: Central Bureau of Statistics, 2019
The education weighted average time taken by the Indonesian population in 2010 reached
9.14 years and increased to 9.81 years in 2018. The level of education will influence the mindset
and orientation in choosing the type of work and the type of food consumed. Higher education
has higher income potential. Gross Regional Domestic Product (PDRB) according to household
expenditure shows the value of household income available for consumption. The PDRB annual
growth base on nationally, Java and outside Java are 5.49%, 5.84%, and 5.00% respectively.
Since PDRB is quite high, but the poor of Indonesia reached 25.8 million people or 9.66% in
2018, its decrease from 2010 which reached 31.02 million people or 13.33% of Indonesia's
population.
3.1.2. Food Prices
Price is a determinant factor in consuming and choosing consumer goods. The increased price
of staple food will reduce the amount of consumption. Food prices condition in Indonesia like
Figure 3.
- 5,000 10,000 15,000 20,000 25,000
0-4
15-19
30-34
45-49
60-64
75+
Population
Age(Year)
Female Male Indonesia

Figure 3 Food Prices in Indonesia in 2010-2018
Source : Ministry Of Agriculture, 2019
In the 2010-2018 period, rice prices at the consumer level grew by 3.9% per year, wheat
flour by 2.58% per year, corn by 7.07% per year, cassava by 10.25% per year, packaged cooking
oil by 3.53 % per year, chicken meat by 0.98% per year and egg by 2.56% per year. Apart from
domestic food prices, imported rice prices also increased from IDR 4,806, - per kg in 2010 to
be IDR 6,337, - per kg in 2017, or grew by 4.03% per year.
3.1.3. Rice Consumption
Rice is the staple food of more than 98% of Indonesia's population with growth in rice
consumption participation of -0.01% per year in the period 2010-2018. The participation of rice
consumption continues to increase until 2016 as an indication of a large number of people
switching from non-rice staple food consumption to rice and starting to decline in 2017, while
per capita consumption decreases. On the other hand, the population increased with the growth
of 1.33% per year and the number of households also increased with the growth of 1.29%. This
condition caused rice consumption increased even though the average annual growth is only
0.12%.
The decline in per capita rice consumption that occurred at 2000-2018 period not able to
reduce the amount of rice consumption in Indonesia, because the population increased with
higher growth. The trend of the population, per capita rice consumption and rice consumption,
can be seen as in Figure 5.
Figure 5 Population Trends, Per capita Rice Consumption and Rice Consumption in Indonesia 2000-
2018
Source : Central Bureau of Statistics, 2019
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2010 2011 2012 2013 2014 2015 2016 2017 2018
Rp/Kg Year
Rice Wheat Corn
Cassava Cooking Oil Chicken Meat
y = -1.1889x + 103.65
y = 0.3187x + 20.382
y = 0.0127x + 21.3880
20
40
60
80
100
120
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Value
Year
Perkapita Consumption (Kg/Capita/Year)
Population (10 Million People)
Rice Consumption (Million Ton)

3.1.4. Social Assistance
The Indonesian government implemented a program of assistance called Rice for the Poor
(Raskin) by giving 15 kg of rice subsidies per household per month at a price of IDR 1,600 / kg
in 2002-2016. The Raskin program was changed to the Rice for the Pre-Prosperous People
(Rastra) program, with the same concept as the Raskin program until 2017. In addition to
Rastra, in 2017 a trial of the Non-Cash Food Assistance (BPNT) program was conducted with
the aim of helping pre-prosperous families in fulfilling their food. This program is not binding
only on fulfilling carbohydrates but also on fulfilling protein through the purchase of rice and
or eggs in e-warungs using e-vouchers. In 2018 the Rastra program in the form of rice subsidies
was changed to 10 kg of free rice per month, and the BPNT program continued more widely.
In summary, the transformation of rice subsidies, rice social assistance, and BPNT as shown in
Figure 6.
Figure 6 Transformation of Raskin, Rastra, and BPNT
Source : Ministry of Social
3.2. Results of Analysis of Factors Affecting Rice Consumption in Indonesia
3.2.1. Selection of Panel Data Estimation Model
In panel data, it is necessary to select the model to get the best and unbiased model [21], [23].
The Chow Test results show that the fixed effect model is better than the common effect model,
while the Hausman Test results show the fixed effect model is better than the random effect
model. Given that a better model in both tests is a fixed effect model, it is not necessary to do
the Breusch Pagan Lagrange Multiplier Test.
3.2.2. Results of Analysis of Rice Consumption Model in Indonesia
The result of estimation of the rice consumption model using panel data regression in Indonesia
carried out with fixed effect model is shown in table 1. Adjusted R2
value of 99.90% means
that variations in rice consumption in Indonesia 99.90% can be explained by the variable: the
number of households, PDRB, rice prices, corn prices, cassava prices, wheat prices, cooking
oil prices, chicken meat prices, egg prices, participation in rice consumption, duration of
education, age and Dummy Rastra_BPNT. The implication is that 0,01% of the variation in the
level of rice consumption in Indonesia was caused by factors not included in the model.
All independent variables together can explain rice consumption in Indonesia (α 1%), while
individually rice consumption in Indonesia significantly influenced by the number of
households, rice prices, cooking oil prices, chicken meat prices, the participation of rice
consumption, age and the dummy Rastra_BPNT (α 5%). Its means that changes in each of the
independent variables have an individually significant effect on rice consumption in Indonesia
if other factors are constant (ceteris paribus). While PDRB, corn prices, cassava prices, wheat
prices, egg prices, and education did not significantly affect rice consumption in Indonesia (α
10%).

Table 1 The Results Of Panel Data Regression Analysis Of Indonesian Rice Consumption
Variable Expected Sign Coefficient Std. Error t-Statistic
C +/- 2.445 ** 0.988 2.475
LNHH + 1.113 *** 0.119 9.364
LNPDRB + -0.023 Ns 0.027 -0.974
LNPoRice - -0.077 *** 0.028 -2.769
LNPMaiz + 0.009 Ns 0.015 0.597
LNPCass + -0.003 Ns 0.014 -0.187
LNPWheat + -0.006 Ns 0.012 -0.506
LNPCO - 0.005 *** 0.001 4.425
LNPCM - 0.045 ** 0.020 2.319
LNPEgg - -0.010 Ns 0.025 -0.398
Part + 0.012 *** 0.002 7.233
LNEduc - -0.126 Ns 0.155 -0.816
LNAge + 0.671 *** 0.257 2.615
DRastra_BPNT - -0.075 *** 0.008 -9.380
Adjusted R-squared 0.999
F-statistic 6.146,624
Prob(F-statistic) 0.000
Note : *** : Significant at α = 1%, ** : Significant at α = 5%
Sumber : Analisis data sekunder (2019)
The estimation results show that the number of households has a significant effect on rice
consumption in Indonesia with a coefficient of 1.113 (positive sign), it means that if there is an
increase in the number of households it will increase rice consumption in Indonesia. Increase
in the number of households with 10% will result in an increase in rice consumption in
Indonesia by 11.13%. The establishment of a household is the beginning of birth in addition to
the emergence of the responsibility to self-regulate domestic life, including in the regulation of
daily consumption. The new households will increase the amount of rice cooked for family
consumption according to the increase in the number of family members.
The price of rice has a significant effect on rice consumption with a coefficient of 0.077.
The negative sign indicates that if there is an increase in rice prices, it will reduce rice
consumption in Indonesia. Increasing rice price with 10% will reduce rice consumption in
Indonesia by 0.77%. An increase in prices will reduce purchasing power so that price increases
will limit the ability to buy and choose goods for consumption. Price elasticity on rice
consumption in Indonesia is inelastic indicates that rice is an ordinary commodity for the people
in Indonesia. It means that the percentage change in prices causes a lower percentage change in
rice consumption.
Cooking oil price has a positive sign means that if there is an increase in the price so that
rice consumption in Indonesia will rise. Increase in the price of cooking oil with 10% will
increase rice consumption in Indonesia by 0.05%. Chicken meat prices have a significant effect
on rice consumption with a coefficient of 0.045, a positive value means that if there is an
increase so that rice consumption will increase. The increase in chicken meat prices by 10%
will increase rice consumption in Indonesia by 0.45%.
Cooking oil and chicken meat are components of side dishes which are commonly
consumed together with staple foods. Expenditures for side dishes averaged 31.2% of total
household food consumption expenditure. In line with [24], the largest expenditure on

households is for staple food followed by tobacco and animal-based food. It possible because
the side dishes consumed by the people are their own product and livestock, not from buying.
The consumption participation of rice has a significant effect, a positive value indicating
that if there is an increase in the consumption participation of rice, the consumption of rice will
increase. Increase in Indonesian rice consumption participation by 1% will increase rice
consumption in Indonesia by 1.2%. The amount of consumption participation in rice reflects
the number of people who consume rice. Rice consumption in Indonesia is carried out more
broadly in all corners of the country, and there has been a significant increase of 234.9 million
people who consumed rice in 2010 to 260.9 million in 2018. It because when compared with
other basic foodstuffs, rice has characteristics that are easier to process, have higher nutritional
content, have a better texture, taste, and aroma and in the past have better prestige.
Age significantly influence rice consumption with positive mark means that if the average
age of the population increase it will increase rice consumption in Indonesia. Increase in the
average age of the population with 10% will increase rice consumption by 6.71%. Most of the
Indonesian population is young and is dominated by a productive age among15-64 years. The
productive age population needs more energy to carry out their activities, and rice is a source
of carbohydrates with the share of the energy supply of more than 50% of the value of energy
sufficiency.
Rastra_BPNT has a significant effect with a negative signaling coefficient, indicates that
the Rastra and BPNT social assistance policies can reduce rice consumption becomes 0.075%
lower than before. The decline in rice consumption after the enactment of the Rastra and BPNT
policies was driven by the choice of people to consume rice or eggs so that consumption
diversification occurred. Consumption options are possible in the application of BPNT, namely
rice only, a combination of rice and eggs or only eggs. It has led to the diversification of
consumption not only in rice because Rastra has been in rice so that the use of BPNT can be
directed at the consumption of eggs as a source of protein so that the fulfillment of people's
nutritional can be more balanced.
4. CONCLUSION
Rice consumption in Indonesia has inelastic price elasticity and statistically significant, while
income elasticity is inelastic but not statistically significant.
The population is the most determining factor for rice consumption in Indonesia, indicated
by an increase in rice consumption even though per capita rice consumption decreases.
The social assistance in consumption matter that is Rastra and BPNT has decreasing rice
consumption, indicates that the food consumption of the Indonesian people has begun to
diversify and the Indonesian people dependence of rice has decreased. For this reason, food
diversification needs to be encouraged in the formulation of policies to reduce risk due to the
dependence of people's food consumption on rice. Thus food security as one of the development
goals in Indonesia can be realized.
ACKNOWLEDGEMENT
We would like to thank Counseling Agency and Human Resources Development of Agriculture
(BPPSDMP) Ministry of Agriculture for financial support for the research.

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DETERMINANT OF RICE CONSUMPTION: EVIDENCE FROM PANEL DATA IN INDONESIA

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