Effects of Farm Income Diversification and Labor Out-Migration on Rice Household Productivity in Indonesia

This study analyzed the impact of income diversification on agricultural output in Indonesia. We specifically focused on the effects of the cultivation of multiple crops, household heads’ employment in non-agricultural sectors, and regional differences in paddy rice productivity per area. We assessed cross-sectional data from the 2013 Census of Agriculture in Indonesia. Indonesian farmers actively channeled wage income into spending on agricultural inputs to improve yields. However, agricultural production continued to depend on human labor, and labor force loss due to wage labor employment was observed. In terms of magnitude, the effect of productivity gains due to labor force loss was larger and was not compensated for by the impact of wage income. Also, while the Indonesian government has been focusing on policies for subsidizing fertilizer use, the data show that less than 30 percent of households receive government subsidies for seeds, fertilizers, and machinery. These utilization rates should be improved.