Title: Demand for Garlic Imports in Indonesia
Author: Inggarani Ulfa Yovirizka
Affiliations : Master of Economics Program, Faculty of Economics and Business, Universitas Airlangga Surabaya, Indonesia
Publisher: Universitas Airlangga
Abstract
Garlic is a necessity for Indonesians as a basic cooking spice and is used for health. Indonesia is categorized as the largest garlic importer in the world. Garlic imports are caused by high consumption while domestic production is low so it is unable to meet consumer demand. The price of imported garlic is cheaper than domestic garlic, making consumers tend to choose imported garlic. Most of the garlic supply is imported from China. This study aims to examine and analyze the effect of GDP, relative prices, production, consumption, and tariffs on the demand for garlic imports in the long and short term. The study also aims to analyze the elasticity of demand for garlic imports in Indonesia in the long and short term. This study uses the Johansen cointegration test and the vector error correction model (VECM). The study examines the demand for garlic imports in Indonesia over a period of 31 years (1985-2016). The data used is time series data. Factors that influence the demand for garlic imports in Indonesia in the short term are imports in the previous one and two years, GDP in the previous one and two years, relative prices in the previous year, and consumption in the previous one and two years. The long-term relationship between demand for garlic imports in Indonesia is influenced by GDP, relative prices, production, consumption, and tariffs. In the long run, all variables are more elastic than in the short run. In the short run, all variables are inelastic. In the long run, all variables are elastic except production, which is inelastic and tends to be small. Production is a more important concern than an import elimination strategy. The government should assist farmers in increasing domestic production through capital financing, marketing, and knowledge. A program to increase domestic garlic production should be implemented in the short term while simultaneously reducing imports.
Keywords: garlic, import, demand