Impacts of trade policy on the welfare of citrus producers and consumers in Indonesia

Abstract

PurposeThis study aims to investigate the factors influencing the citrus trade in Indonesia, the effects of tariff and non-tariff policies on the industry and the welfare of producers and consumers.Design/methodology/approachThe research used annual series data from 1991 to 2021 and employed inferential, simulation, and descriptive analyses. The two-stage least squares (2SLS) of 19 simultaneous equations were used to estimate parameters.FindingsThe results indicate that free trade policies and restrictions have influenced the citrus industry, leading to a reduction in Indonesian citrus imports, and increased consumer and producer prices. However, eliminating import tariff policies on citrus from China and import restrictions increased producer surplus while decreasing consumer surplus, government revenue, and total welfare. Therefore, trade policies should be combined with non-trade policies such as citrus region development policies and advancing cultivation technology.Originality/valueThis study provides empirical evidence for the Indonesian government to formulate effective citrus trade and development policies. It emphasizes the importance of carefully considering the impact of trade policy on the citrus industry and the need to implement non-trade policies such as citrus zone development policies and advancing cultivation technology to benefit both producers and consumers.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2023-0148