Comparison of the Impact of Supply-Side and Demand-Side Policies in the Agricultural Sector: An Input-Output Approach (Case Study of Bengkulu Province)
Copyright © 2026 Budi Kurniawan, Ketut Sukiyono, Retno Agustina Ekaputri, Mochamad Ridwan. Published by Nan Yang Academy of Sciences Pte. Ltd.
This is an open access article under the Creative Commons Attribution-NonCommercial 4.0 International (CC BY-NC 4.0) License.
Abstract
This study aims to compare the impacts of demand- and supply-side policies within the input-output (IO) model framework. As a model that incorporates general equilibrium phenomena, the IO model simplifies policy choices into two types: demand-side and supply-side. Local governments have very limited fiscal capacity and rely on funds from the central government. Regions with budget limitations generally depend on the agricultural sector. This research will address issues arising when policymakers must choose between demand- and supply-side policies to accelerate regional development through the agricultural sector. This empirical study uses two types of inverse matrices in the IO model: the Leontief model and the Ghosian model. The IO model is based on a system of mathematical equations that applies general equilibrium phenomena. This study uses data from the 2024 IO tables of Bengkulu Province. The results indicate that, although demand-side policies have a greater impact on total output, there is no significant difference in the change of average sectoral output between the two approaches when applied to the agricultural sector. However, significant differences are seen at the sub-sector level, including horticulture, livestock, and agricultural services. Demand-side policies are more effective than supply-side policies at increasing total economic output. Therefore, demand-side policies can be considered more effective than supply-side policies. Policy effectiveness is influenced by inter-sectoral linkages, among other things.
Keywords: Agricultural Sector, Input-Output, Leontief Inverse Matrix, Ghosian Inverse Matrix
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