Convergence of Food Prices between Regions in Indonesia

Abstract

In Indonesia, the increase in food prices usually results in the rise in the inflation rate. To cope with this problem, a better food distribution among regions is absolutely required. This study aimed to describe the dynamics of food prices, to test the convergence level of food prices and to analyze the factors that influence the changes in food prices between regions in Indonesia. The data used were obtained from the Central Agency of Statistics and the Ministry of Agriculture from 2002 to 2009. The method used was analysis of dynamic panel data (First Difference-Generalized Methode Moment/FD-GMM). The results of the study showed that all commodities of food prices were convergent, soybean at the highest level and chili at the lowest, while the factors that influence changes in food prices were production rate, Gross Domestic Product (GDP), population and infrastructure.