Advances in Economics, Business and Management Research (AEBMR), volume 46 1st Economics and Business International Conference 2017 (EBIC 2017) The Effect of Rice Subsidy on The Expenditure of Public Family Consumption And Welfare of Poor Households Renny Maisyarah Student Postgraduate Faculty Economi Universitas Andalas Padang, West of Sumatera Lecture Universitas Pembangunan Panca Budi North of Sumatera [email protected] Sofyardi Universitas Andalas, Padang, West of Sumatera [email protected] Abstract–The aim of this study is to find out an who can only meet the needs of eating less than 2100 influence of rice subsidy on the consumption calories per capita per day. expenditure of poor families in North Sumatera The poor in North Sumatera Province in 2013 Province, so that there is an impact on the welfare reached 1,390.80 thousand people. In 2014 it fell to of poor families in North Sumatra Province, and 1,360.60 thousand people and again increased also the influence of rice subsidy on family welfare significantly to 1,508.14 thousand inhabitants. On of poor families in Province North Sumatra average from 2013-2015, the number of poor people through consumption expenditure. In the research in North Sumatera Province reaches 1,419.85 use explanatory survey which is in the form of ex- thousand inhabitants. These figures are the highest in post facto where is the research of series of comparison with other provinces on the island of variable-free variables have occurred, when the Sumatra. researcher started to observe the dependent The results showed that the increase of variable. The type of data in this study is the prosperity through rice subsidy program is greater primary data in the form of questionnaires than the subsidy in the form of sugar and cooking oil. distributed to the respondents. The population in "To obtain a level of well-being, the demand system this research is the number of recipients of rice model using the Linear Approximation Almost Ideal subsidy in North Sumatera Province from 33 Demand System (LA / AIDS) model, applied to districts/cities in 2015 as many as 746,220 SUSENAS data 2007 and 2008, the world food price households. The sample in this research are 5 fluctuations that occurred due to competition for food (five) biggest rice subsidy areas, among others; and energy, poor households have difficulty in Deli Serdang District, Langkat Regency, Medan adjusting food prices consumed. In anticipation, the City, Simalungun Regency, and Asahan Regency. government should conduct a market intervention in The method of analysis used in this research is the form of subsidies that are packed in various Structural Equation Modeling (SEM). programs, one of which is the Raice subsidy program. Keywords –Government Policy, Subsidy According to Tabor, Steven R and Sawit[1], food Program, Poverty. aid can solve some of the nutritional problems of poor families. In addition to direct benefits, the Raice I. INTRODUCTION subsidy program also provides indirect benefits such as job creation, health, and education costs, and Poverty is the inability to meet basic needs such contributes to price stabilization. Anak Bangsa Peduli as food, clothing, shelter, education, and health. [2], reported the presence of resource persons who Poverty can be caused by the scarcity of basic needs thought that Rice subsidy program was beneficial fulfillment, or the difficulty of access to education because it created employment (labor-intensive) for and employment. According to the Central Bureau of other parties such as freight and coolie. LP3ES [3], Statistics (BPS), poverty is the condition of a person reports that although small, the transfer of income from the Rice subsidy program can save money, among others, for health and education costs. Copyright © 2018, the Authors. Published by Atlantis Press. 78 This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/). Advances in Economics, Business and Management Research (AEBMR), volume 46 Furthermore, wrote that Rice subsidy program The formulation of the welfare concept by the could maintain the stability of rice prices. The results Central Bureau of Statistics (BPS) and the National of field studies show that provincial, district and sub- Family Planning Coordinating Board (BKKBN) says district stakeholders have diverse assessments of the that the families are supposed to be in the balance if benefits of the Rice subsidy program for poor they meet the following criteria. households. Some stakeholders rated the Rice a) Families that can meet the needs of its members subsidy program as helping poor people in food whether clothing, food, housing, social and fulfillment, and some considered the Rice subsidy religious needs; program as a poor educational program for making b) Families that have a balance between family poor households spoiled. Beneficiary households income and the number of family members; and assess Rice subsidy program as beneficial although c) Families who can meet the health needs of family the amount of rice is found less and the quality is members, live together with the surrounding sometimes poor community, worship in addition to fulfilled basic needs. II. LITERATURE REVIEW The law of demand reads "When the price rises than a number of goods required decreases vice versa According to the Central Bureau of Statistics when the price drops, then some goods demanded (2010), poverty is the inability to meet minimum increases." Based on the law of demand above, when standards of basic needs that include both food and the price of a good or service rises then the quantity non-eating needs. Compare the rate of consumption of demand for goods or services will fall. The of the population with the poverty line or the number decrease in the quantity of goods or services is due to of rupiahs for monthly consumption. While Bappenas two reasons: (2004) defines poverty as a condition in which a a) Substitution effect person or group of men and women are unable to According to Pyndick [5], when the price of a fulfill their basic rights to maintain and develop a good or service rises, many households will switch, dignified life. The basic rights of the village in whole or in part, to other similar goods or services. community include the fulfillment of food, health, So the amount purchased from goods or services education, employment, housing, clean water, land, whose price has gone up will be less. natural resources and the environment, security from b) income effects the treatment or threat of violence and the right to States when the price of a good or service rises (if participate in socio-political activities, both for the income received by the customer remains/does women and for men. not change), a consumer will feel poorer than before. In other countries the programs that have been This case is because they assume that their income is implemented in poverty reduction are poverty decreasing / slightly, so they will limit the assistance, or assisting directly with the poor, this consumption of goods or services. approach has been part of the approach of European The effect of price changes on demand as society since the Middle Ages; assistance to the described above can be illustrated in Figure 2.1 In the individual, ie the efforts undertaken to change the figure it appears that the budget line was originally an situation of the poor on the basis of the individual, RS where there were two food items and clothing. including law, education, social work, job-seekers; Here, the consumer maximizes utility by choosing a preparation for the weak, ie, the efforts made by market basket at A, thus obtaining service levels from providing assistance to people categorized as poor, the U1 indifference curve. such as parents or individuals with disabilities, or circumstances that make the poor, such as the need for food and health (The World Bank, 2007). Stiglitz[4], states that to define welfare, the multidimensional formulation should be used. These dimensions include material living standards (income, consumption, and wealth), health, education, individual activities including work, political voice, and governance, social relationships and kinship, the environment (present and future conditions), both economic and physical. All of these dimensions show the quality of life of the people and to measure it requires objective and subjective data. 79 Advances in Economics, Business and Management Research (AEBMR), volume 46 Food line, which is the line c. The U3 curve is alluded to by line c in E2 indicating that the consumption of clothing has now increased to Q2. In other words, the distribution of goods and services between consumers when after the allocation of goods between consumers results in a reduction of satisfaction for at least one person. Production will be efficient when any viable reallocation of intercompany input lowers the output level of at least one firm or a commodity. This means that the optimum pareto is a position where it is impossible to improve one's well-being. Pareto optimum indicates the criteria for making a welfare assessment. Pareto paid no attention to the distribution of income. According to this concept a framework of distribution or a reorganization of production and trade would be seen as an increase in welfare or decline in welfare, it would increase or worsen the position of at least one Figure 2.1: Derivation of Clothes Demand Curve person without adversely affecting the other position. The concept of pareto in optimum social welfare If the food price falls causing the budget line to is the same as Baumol's concept of ideal output. circle outside the RT line. The consumer now Pareto requires three marginal conditions to explain chooses a market basket on B on the U2 indifference the achievement of optimal situations in consumption, curve.