Regional heterogeneity in rice prices in Indonesia: a province-level panel study of surplus and deficit areas

Abstract

Rice prices in Indonesia vary across provinces, yet empirical evidence on how rice price policy instruments operate differently across surplus and deficit markets remains limited. This study investigated whether the determinants of retail rice prices differ between surplus provinces with relatively low prices and deficit provinces with relatively high prices. Using monthly panel data at the operating-area level of Perum BULOG, the state-owned enterprise responsible for managing public rice stocks, the analysis covered 26 provinces from January 2018 to December 2022 (N = 1, 560). Provinces were grouped into surplus–low-price and deficit–high-price categories based on average retail prices and a rice adequacy index. Separate fixed-effects panel models with an AR(2) error structure were estimated for each group, relating retail prices to fuel costs, policy instruments, domestic production, macroeconomic conditions, and international rice prices. This study found that the effects of rice price policy instruments differ by market type: the government purchasing price (HPP) is insignificant in surplus provinces but significantly associated with higher retail prices in deficit provinces, whereas public stock (CBP) holdings are associated with lower prices only in surplus provinces. Fuel prices, with a three-month lag, were the strongest cost-push factor in both groups. Higher rice production reduced prices across all provinces, with a more pronounced effect in deficit provinces where supplies were more constrained. These results underscore the need for province-specific rice price policies that reflect heterogeneous market structures and highlight the usefulness of the proposed panel models for short-term price monitoring and policy evaluation under normal market conditions.