DETERMINANTS OF FARMERS’ WELFARE IN INDONESIA: EVIDENCE FROM THE 2020–2024 MACROECONOMIC AGRICULTURAL INDICATORS
Keywords:
Farmers’ Welfare, Terms of Trade, Price Index, Agricultural Costs, Rural EconomyAbstract
Farmers’ welfare remains a central issue in Indonesia’s rural economic development, particularly during periods of global economic volatility and increasing climate-related production risks. This study analyzes the determinants of farmers’ welfare in Indonesia from 2020 to 2024 using the Farmers’ Terms of Trade (NTP) as the welfare indicator. Monthly macroeconomic agricultural data were examined through multiple linear regression to evaluate the effects of the Farmers’ Received Price Index (IDTP), Farmers’ Paid Price Index (IDBP), Household Consumption Expenditure (KRT), and Production and Capital Input Costs (BPRB). The results indicate that IDTP has a significant positive effect on farmers’ welfare, demonstrating that higher commodity selling prices enhance purchasing power and income stability. Conversely, IDBP, KRT, and BPRB show significant negative impacts, indicating that rising input prices, increasing living costs, and higher production capital burdens reduce farmers’ net income and welfare. These findings are reinforced by recent empirical evidence that climate vulnerability and agricultural extension performance mediate the effectiveness of price incentives and cost management strategies. Policy implications highlight the urgency of stabilizing output market prices, improving access to cost-efficient inputs, strengthening adaptive capacity to climate impacts, and enhancing the institutional performance of agricultural extension systems. Strengthening these support mechanisms is essential to advancing inclusive and sustainable farmer welfare in Indonesia.
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