To overcome the chronic food shortage during the first two decades of its independence (1945-65), the Indonesian Government established a comprehensive rice intensification programme; particularly large-scale adoption of high-yielding modern seed varieties, development of irrigation systems, and increased use of chemical fertilizers and pesticides. During the 1970s and 1980s, this intensification programme caused rice production to grow at an annual rate of approximately 4.67 per cent, which was relatively high compared to other developing countries (BPS 1973-91; Oka 1991 and 1995).
Despite the remarkable success of the rice intensification programme, the excessive use of pesticides caused serious environmental problems. The problems include acute and chronic human pesticide poisoning, animal poisoning and contaminated agricultural products, destruction of beneficial natural parasites and pest predators, and pesticide resistance in pests (Achmadi 1991; Oka 1995; Pimentel et al. 1992; and Antle and Pingali 1994). To overcome these environmental problems caused by the overuse of pesticide, in the beginning of 1990s, the Indonesian Government adopted a strategy of integrated pest management (IPM). The programme altered the predominant government policy of pest control from a unilateral method, depending solely on pesticide, to a combination of various control tactics to manage pests, including synchronized planting, crop rotation, natural predator, and pesticides.
Economic literature that analyses the impact of the IPM programme on household incomes and national economic performance in Indonesia is limited. Oka (1995) reported that rice farmers who implemented the IPM programme had been able to reduce the use of pesticides by approximately 56 per cent and increase rice yields by approximately 10 per cent. The Indonesian IPM National Program Monitoring and Evaluation Team (1993) argued that IPM farmers would increase their incomes by approximately 50 per cent. Feder et al. (2004a and 2004b), on the other hand, doubted that the IPM programme has actually made a difference.
Literature on other countries' experiences is also limited (Van den Berg 2004). Among others are Rola and Pingali (1992), Antle and Pingali (1994), and Pingali et al. (1994) who conducted studies on the use of pesticides, productivity and farmer health in the Philippines. In the United States, the literature includes the works of Lichtenberg et al. (1988), Chamber and Lichtenberg (1994), and Zilberman et al. (1991). These studies, however, only observed the partial impact of the IPM programme on farmer incomes, i.e., did not take into account the multiplier impact of an IPM programme on incomes of both farmers and other household groups. The studies also did not mention the impact of the IPM programme on the national economy.
This research utilizes a Computable General Equilibrium (CGE) model to analyse the overall impact, including the multiplier impact, of the Indonesia integrated pest management programme in the rice sector on the national economy and household incomes for various socioeconomic groups.
The basic CGE model adopted in this paper is the Indonesian CGE developed by Lewis (1991). The CGE consists of six blocks of equations. First, the Production Block contains equations representing the structure of production activities and producers' behaviour. Second, the Consumption Block holds equations modelling the behaviour of households and other institutions. Third, the Income Block includes equations mapping transfer incomes from production sectors to households and institutions, and between households and institutions. Fourth, the Export-Import Block contains equations simulating the country's decision to export or import goods and services. Fifth is the Investment Block, which consists of several equations representing the decision to invest in the economy, and the demand for goods and services used in the construction of the new capital. …