Risks and spatial connectivity evidence from food price crisis in rural Indonesia

► We examined the impact of the agricultural commodity price surge globally experienced in 2007/2008 and thereafter on income growth of agricultural producer and non-producer households using recent panel data from Indonesia. ► Empirical results show, first, that during this period, producers experienced significantly higher earnings and total income growth than non-producers (narrowing their income gap). ► The negative effect on non-producers' real incomes was smaller in spatially well-connected areas. ► To mitigate the impact, private transfers (such as remittances) and employment incomes increased among non-producers more significantly in spatially well-connected areas. ► In contrast, government programs did not effectively cushion the income shock. Thus, informal insurance was more effective than formal government-funded social protection programs to mitigate the crisis shock.