Do Local Policy Innovations Stabilize Rice Prices and Improve Welfare? Evidence from Subnational Interventions in Indonesia

This study examines whether local policy innovations can strengthen food security by stabilizing rice prices and improving farmer welfare in Indonesia, where rice is both a staple food and a central policy concern. Drawing on fieldwork in three districts in Java and Bali, combined with Susenas microdata (2014–2023) and administrative records, we evaluate subnational interventions including warehouse receipt systems, cooperative procurement, and digital price transparency platforms. Using a mixed-methods approach, we apply a four-stage value chain framework (production, harvest, marketing, and distribution) and estimate impacts through a Difference-in-Differences design, complemented by Propensity Score Matching. The results show that innovations implemented at the marketing and distribution stages particularly cooperative-led sales and digital price information systems are associated with slower growth in consumer rice prices. Districts adopting these innovations experienced post-treatment rice price increases that were approximately 9–10 percent lower than those in comparable non-treated districts. At the same time, farmer welfare improved significantly. Farmers’ Terms of Trade (Nilai Tukar Petani, NTP), used as an indicator of economic access to food for farming households, increased by around 2–3 index points in treated areas, with the most significant gains observed in districts implementing downstream interventions that reduced reliance on intermediaries. Innovations at the production and harvest stages also contributed positively to NTP, though with smaller magnitudes. Overall, the findings indicate that locally driven institutional innovations can enhance food security by improving economic access for producers while moderating consumer-level food price pressures. These results highlight the importance of subnational policy experimentation and cooperative-based mechanisms as complements to national food stabilization strategies in decentralized food systems.
Keyword: Local Policy Innovations, Price Stabilization, Smallholder Welfare, Subnational Governance, Indonesia Food Security