Do Local Policy Innovations Stabilize Rice Prices and Improve Welfare? Evidence from Subnational Interventions in Indonesia

Districts adopting these innovations experienced post-treatment rice price increases that were approximately 9–10 percent lower than those in comparable non-treated districts. At the same time, farmer welfare improved significantly. Farmers’ Terms of Trade (Nilai Tukar Petani, NTP), used as an indicator of economic access to food for farming households, increased by around 2–3 index points in treated areas, with the most significant gains observed in districts implementing downstream interventions that reduced reliance on intermediaries.

Innovations at the production and harvest stages also contributed positively to NTP, though with smaller magnitudes. Overall, the findings indicate that locally driven institutional innovations can enhance food security by improving economic access for producers while moderating consumer-level food price pressures. These results highlight the importance of subnational policy experimentation and cooperative-based mechanisms as complements to national food stabilization strategies in decentralized food systems.

Keyword: Local Policy Innovations, Price Stabilization, Smallholder Welfare, Subnational Governance, Indonesia Food Security