THE PRODUCTION–VALUE CHAIN PARADOX: WHY INCREASING LIVESTOCK OUTPUT FAILS TO IMPROVE SMALLHOLDER WELFARE IN RURAL INDONESIA

Abstract

This study examines the structural disconnect between livestock production growth and smallholder welfare in rural Indonesia, conceptualized as the production–value chain paradox. While rural development policies have successfully increased livestock output, the expected improvements in income and welfare remain limited. This study aims to explain this paradox by integrating production dynamics, value chain structures, and institutional factors within a unified analytical framework. The study employs a qualitative policy analysis combined with a bibliometric approach to map the evolution of the literature and identify dominant research themes. Bibliometric data are derived from Scopus-indexed publications and analysed using Microsoft Excel and VOSviewer to examine publication trends, citation patterns, and keyword co-occurrence. The empirical analysis focuses on livestock development policy in Kebumen Regency, Indonesia, as a representative case of smallholder-based rural economies. The findings indicate that production growth alone is insufficient to improve welfare due to structural constraints, including limited market access, dependence on intermediaries, weak value chain integration, and inadequate institutional capacity. These constraints position smallholders in low-value segments of the livestock system, limiting their ability to capture economic value. This study contributes to the literature by introducing the concept of the production–value chain paradox and by demonstrating that welfare outcomes are shaped by the interaction between production, market access, value chain integration, and institutional capacity. The findings suggest that rural development strategies need to move beyond production-oriented approaches toward more integrated, value chain–driven interventions to achieve inclusive and sustainable welfare improvement.