The Economics Behind an Ecological Crisis: Livelihood Effects of Oil Palm Expansion in Sumatra, Indonesia
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While the negative ecological effects of the rapid expansion of oil palm in Southeast Asia are far-reaching and relatively widely studied, the socioeconomic consequences have received much less attention in the literature. We examine whether local farmers in Indonesia benefit from cultivating oil palm. We also look at the impact dynamics and possible spillover effects on other farmers. Our analysis builds on panel data collected from 680 farm households in Jambi Province, Sumatra. We show that oil palm cultivation has significant positive effects on farmers’ livelihoods. The economic gains allow farm households to increase their consumption. Oil palm has lower labor requirements than alternative crops. Hence, oil palm farmers can cultivate larger areas and also reallocate saved labor time to non-farm economic activities, which contributes to additional secondary gains. Policies aimed at regulating further oil palm area expansion will have to account for the economic benefits of this crop for the local population.
KeywordsFarmer welfare Land-use changes Farm household survey Spatial modeling Jambi Province, Sumatra Indonesia
This study was supported financially by Deutsche Forschungsgemeinschaft (DFG) as part of the German-Indonesian Collaborative Research Center CRC990: Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia). The authors gratefully acknowledge the willingness of the sample farm households to participate in the survey. We also thank two anonymous reviewers for valuable comments.
This study was funded by Deutsche Forschungsgemeinschaft (DFG) (CRC 990).
Compliance with Ethical Standards
Conflict of Interest
The authors declare that they have no conflict of interest.
All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards.
Informed consent was obtained from all individual participants included in the study.
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