Welfare implications of policy-induced structural changes on the Indonesian poultry industry

This study examines the producer and consumer welfare associated with structural change of supply attributed to the effect of a government policy restricting the size of the production unit. The performance of the poultry industry in Indonesia is analyzed in terms of producer and consumer welfare using supply and demand elasticities. The elasticity of supply and demand were estimated using the Seemingly Unrelated Regressions (SUR) method. The hypothesized policy-induced structural change is estimated through a dummy variable accounting for shift in supply associated with implementation of the policy.It is found that structural change induced by the restructuring policy shows a negative impact on the output supplied and welfare of society. Welfare losses are estimated for different levels in the marketing system namely producer, wholesaler and retail levels. Eighty percent of the losses are shared approximately equally by producers and consumers with the remaining twenty percent borne by the marketing sector