Differential livelihood impacts of oil palm expansion in Indonesia

Abstract

In this article, the impacts of oil palm adoption on livelihoods of smallholder farm households are analyzed. The study builds on survey data from Sumatra, Indonesia. Treatment-effects and endogenous switching regression models suggest that smallholder households benefit from oil palm adoption on average. Part of the benefit stems from the fact that oil palm requires less labor than rubber, the main alternative crop. This allows oil palm adopters to allocate more labor to off-farm activities and/or to expand their farmland. For households with a low land-to-labor ratio, rubber is typically a more lucrative crop than oil palm. Depending on various social and institutional factors, households' access to land, labor, and capital varies, contributing to impact heterogeneity. Welfare gains associated with oil palm are more pronounced among households that have formal land titles and access to additional land to expand their farm size during the process of adoption.JEL classifications: Q12, Q15

Palm Oil and the Politics of Deforestation in Indonesia

“…We contribute to this literature by providing the first causal identification of how political incentives interact with agricultural incentives. Second, this paper also relates to the literature con the environmental externalities of agricultural goods production, which documents that under insufficient enforcement mechanisms, demand shocks and technological advances in agriculture lead to negative impacts on the environment (Angelsen, 2007;Barreto and Silva, 2010;Hargrave and Kis-Katos, 2013;Krishna et al, 2017;Gatto et al, 2017;Busch et al, 2015;Börner et al, 2015). We contribute to this literature by showing that the prospects of future economic benefits drive land use decisions and expand the forest frontier.…”

“…The adoption of oil palm increased land productivity, farm income, and educational attainment (Drescher et al, 2016;Krishna et al, 2017;Edwards et al, 2020). Oil palm is less labor intensive and allows landholders to allocate labor to additional income generating off-farm activities (Krishna et al, 2017). Non-farm households further benefit via labor market mechanisms in regions with higher oil palm adoption rates (Dib et al, 2018).…”

Challenges to Implementing Socially-Sustainable Community Development in Oil Palm and Forestry Operations in Indonesia

“…Thus, some communities consider that oil palm is their best option to fulfil their development needs. However, many later find that there are unexpected impacts and significant externalities [17,[62][63][64].…”

The Moral Minefield of Ethical Oil Palm and Sustainable Development

“…Unlike the literature on the environmental impacts of oil palm development, which contains various studies using counterfactual-based designs (e.g., Carlson et al, 2018;Morgans et al, 2018), our knowledge of local-scale social welfare is primarily based on case studies (for exceptions see Alwarritzi et al, 2015;Euler et al, 2017;Krishna et al, 2017). Such case studies can provide compelling evidence of negative consequences, for example, from conflicts over land rights,…”