Modelling Economic Behavior of Smallholder Households in Coastal Areas of Yogyakarta Indonesia

Fauzan, Muhammad
Syaukat, Yusman
Kusnadi, Nunung
Baga, Lukman Mohammad

Electronic Journal of Education, Social Economics and Technology
Vol 6, No 1 (2025)

Factual conditions show that adopting coastal agricultural technology in Yogyakarta, Indonesia, has not met expectations. As the decision-makers of adoption, smallholder households are rational economic entities acting as producers and consumers who maximize utility and profit from their farm production. Specifically, this study is the first attempt to build an economic model of smallholder households that integrates technology adoption components in Indonesia. The model is also used to analyze the impact of input and output price policies on technology adoption, production, and labor allocation. This study uses primary data collected by survey method on 196 farmer respondents. Data were estimated using the two-stage least square (2SLS) method. The study findings reveal that higher farm output prices catalyze a series of beneficial agricultural outcomes, including expanding cultivated land, optimized input allocation, augmented production processes, and adopting innovative technologies. Fertilizer price subsidy policies have also proven practical policy tools to improve agricultural productivity.