The contribution of agricultural crop production towards the economic growth of Indonesia’s agricultural sector

Abstract

The agricultural sector is annually included in the top three after the manufacturing sector and wholesale and retail trade sectors as Indonesia’s largest contributor to gross domestic product (GDP). The average contribution of the agricultural sector to the country’s income is around 11–13% of total GDP. The GRDP of the agricultural sector (AgriGRDP) is an indicator of the economic growth of Indonesia’s agricultural sector. This study aims to examine the contribution of plantation crop production (PPC), food crop production (PFC), horticultural crop production (PHC), and farmer terms of trade (FTT) to the AgriGRDP. This study uses secondary data sourced from BPS-Statistics Indonesia. This research method uses panel data regression analysis with time series data for 2018–2021 and cross-sectional data from 33 provinces in Indonesia, resulting in 132 observations. The results of this study found that the best econometric model to answer the research objectives is the random effect model (REM). The findings of this study indicate that simultaneously and partially, the variables PPC, PFC, PHC, and FTT have a significant positive effect on AgriGRDP. An increase in PPC, PFC, PHC, and FTT will increase Indonesia’s AgriGRDP.