Abstract
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.
Similar content being viewed by others
Data Availability
The data used in this study are archived with openly accessible, keyword-searchable metadata and data holder contact details for data requests (https://efforts-is.uni-goettingen.de). Datasets used in this study have the following identification numbers: 12,620, 13,500, 13,501, 13,520, 13,660, 13,642, 13,643, 13,644, 13,647, 13,648, 13,649, 13,650, 13,651 (household-level data); 13,521, 13,600, 13,601, 13,620 (plot-level data); 13,680 (village-level data).
References
Abood, S. A., Lee, J. S. H., Burivalova, Z., Garcia-Ulloa, J., and Koh, L. P. (2015). Relative contributions of the logging, fiber, oil palm, and mining industries to forest loss in Indonesia. Conservation Letters 8(1): 58–67.
Azhar, B., Lindenmayer, D. B., Wood, J., Fischer, J., Manning, A., McElhinny, C., and Zakaria, M. (2011). The conservation value of oil palm plantation estates, smallholdings and logged peat swamp forest for birds. Forest Ecology and Management 262(12): 2306–2315.
Badan Pusat Statistik. (2012). Jambi in figures. Statistical Office of Indonesia, Jakarta, Indonesia. Available online at http://jambiprov.go.id/index.php?jbi_angka, checked on 02.02.2016.
Barnes, A. D., Jochum, M., Mumme, S., Haneda, N. F., Farajallah, A., Widarto, T. H., and Brose, U. (2014). Consequences of tropical land use for multitrophic biodiversity and ecosystem functioning. Nature Communications 5: 5351–5357.
Blundell, R., and Preston, I. (1998). Consumption inequality and income uncertainty. The Quarterly Journal of Economics 113(2): 603–640.
Bourke, R. M., and Harwood, T. (eds.) (2009). Food and agriculture in Papua New Guinea, ANU Press, Canberra.
BPS (2014). Poverty module: social and population database statistical office Indonesia (Badan Pusat Statistik). Jakarta, Indonesia. Available online at Statistical Office Indonesia, checked on 24.11.2014.
BPS, BKKBN, MOH, and ICF International (2013). Indonesia demographic and health survey 2012, BPS, BKKBN, Kemenkes, and ICF International, Jakarta.
Budidarsono, S., Dewi, S., Sofiyuddin, M., and Rahmanulloh, A. (2012). Socio-economic impact assessment of palm oil production. (ICRAF Technical Brief, 24), World Agroforestry Centre, SEA Regional Office, Bogor, Indonesia.
Byerlee, D., Falcon, W. P., and Naylor, R. L. (2017). The tropical oil crop revolution: food, feed, fuel, and forests, Oxford University Press, New York.
Carlson, K. M., Curran, L. M., Ratnasari, D., Pittman, A. M., Soares-Filho, B. S., Asner, G. P., et al. (2012). Committed carbon emissions, deforestation, and community land conversion from oil palm plantation expansion in West Kalimantan, Indonesia. Proceedings of the National Academy of Sciences of the United States of America 109(19): 7559–7564.
Clough, Y., Krishna, V. V., Corre, M. D., Darras, K., Denmead, L. H., Meijide, A., et al. (2016). Land-use choices follow profitability at the expense of ecological functions in Indonesian smallholder landscapes. Nature Communications 7: 13137–13149.
Corrado, L., and Fingleton, B. (2012). Where is the economics in spatial econometrics? Journal of Regional Science 52(2): 210–239.
Cramb, R., and McCarthy, J. F. (2016). Characterising oil palm production in Indonesia and Malaysia. In Cramb R., and McCarthy J. F. (eds.), The oil palm complex: smallholders, agribusiness, and the state in Indonesia and Malaysia, NUS Press, Singapore, pp. 27–77.
Drescher, J., Rembold, K., Allen, K., Beckschafer, P., Buchori, D., Clough, Y., et al. (2016). Ecological and socio-economic functions across tropical land use systems after rainforest conversion. Philosophical transactions of the Royal Society of London. Series B, Biological Sciences 371(1694): 20150275.
Elhorst, J. P. (2010). Applied spatial econometrics: raising the bar. Spatial Economic Analysis 5(1): 9–28.
Euler, M., Hoffmann, M. P., Fathoni, Z., and Schwarze, S. (2016a). Exploring yield gaps in smallholder oil palm production systems in eastern Sumatra, Indonesia. Agricultural Systems 146: 111–119.
Euler, M., Schwarze, S., Siregar, H., and Qaim, M. (2016b). Oil palm expansion among smallholder farmers in Sumatra, Indonesia. Journal of Agricultural Economics 67(3): 658–676.
Euler, M., Krishna, V., Schwarze, S., Siregar, H., and Qaim, M. (2017). Oil palm adoption, household welfare, and nutrition among smallholder farmers in Indonesia. World Development 93: 219–235.
FAOSTAT (2014). Production. Food and Agricultural Organization, Rome. Available online at http://faostat3.fao.org, checked on July 2017.
Fitzherbert, E. B., Struebig, M. J., Morel, A., Danielsen, F., Bruhl, C. A., Donald, P. F., and Phalan, B. (2008). How will oil palm expansion affect biodiversity? Trends in Ecology & Evolution 23(10): 538–545.
Ganser, D., Denmead, L. H., Clough, Y., Buchori, D., and Tscharntke, T. (2017). Local and landscape drivers of arthropod diversity and decomposition processes in oil palm leaf axils. Agricultural and Forest Entomology 19(1): 60–69.
Gatto, M., Wollni, M., and Qaim, M. (2015). Oil palm boom and land-use dynamics in Indonesia: the role of policies and socioeconomic factors. Land Use Policy 46: 292–303.
Gatto, M., Wollni, M., Asnawi, R., and Qaim, M. (2017). Oil palm boom, contract farming, and rural economic development: village-level evidence from Indonesia. World Development 95: 127–140.
Gibbs, H. K., Ruesch, A. S., Achard, F., Clayton, M. K., Holmgren, P., Ramankutty, N., and Foley, J. A. (2010). Tropical forests were the primary sources of new agricultural land in the 1980s and 1990s. Proceedings of the National Academy of Sciences of the United States of America 107(38): 16732–16737.
Guillaume, T., Damris, M., and Kuzyakov, Y. (2015). Losses of soil carbon by converting tropical forest to plantations: erosion and decomposition estimated by delta(13) C. Global Change Biology 21(9): 3548–3560.
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica 46: 1251–1271.
Hoffmann, M. P., Donough, C. R., Cook, S. E., Fisher, M. J., Lim, C. H., Lim, Y. L., et al. (2017). Yield gap analysis in oil palm: framework development and application in commercial operations in Southeast Asia. Agricultural Systems 151: 12–19.
Koh, L. P., Miettinen, J., Liew, S. C., and Ghazoul, J. (2011). Remotely sensed evidence of tropical peatland conversion to oil palm. Proceedings of the National Academy of Sciences USA 108(12): 5127–5132.
Konopik, O., Steffan-Dewenter I., and Grafe, T. U. (2015). Effects of logging and oil palm expansion on stream frog communities on Borneo, Southeast Asia. Biotropica 47(5): 636–643.
Krishna, V. V., Euler, M., Siregar, H., and Qaim, M. (2017a). Differential livelihood impacts of oil palm expansion in Indonesia. Agricultural Economics 48(5): 639–653.
Krishna, V. V., Kubitza, C., Pascual, U., and Qaim, M. (2017b). Land markets, property rights, and deforestation: insights from Indonesia. World Development 99: 335–349.
Kubitza, C., Krishna, V.V., Urban, K., Alamsyah, Z., and Qaim, M. (2018). Land property rights, agricultural intensification, and deforestation in Indonesia. Ecological Economics. https://doi.org/10.1016/j.ecolecon.2018.01.021.
LeSage, J. P., and Pace, R. K. (2009). Introduction to spatial econometrics, CRC Press, Boca Raton.
Lewis, D. J., Barham, B. L., and Robinson, B. (2011). Are there spatial spillovers in the adoption of clean technology? The case of organic dairy farming. Land Economics 87(2): 250–267.
Lucey, J. M., and Hill, J. K. (2012). Spillover of insects from rain forest into adjacent oil palm plantations. Biotropica 44(3): 368–377.
Luskin, M. S., Christina, E. D., Kelley, L. C., and Potts, M. D. (2014). Modern hunting practices and wild meat trade in the oil palm plantation-dominated landscapes of Sumatra, Indonesia. Human Ecology 42(1): 35–45.
Rist, L., Feintrenie, L., and Levang, P. (2010). The livelihood impacts of oil palm: smallholders in Indonesia. Biodiversity and Conservation 19(4): 1009–1024.
Sibhatu, K. T., Krishna, V. V., and Qaim, M. (2015). Production diversity and dietary diversity in smallholder farm households. Proceedings of the National Academy of Sciences USA 112(34): 10657–10662.
Stibig, H.-J., Achard, F., Carboni, S., Raši, R., and Miettinen, J. (2014). Change in tropical forest cover of Southeast Asia from 1990 to 2010. Biogeosciences 11(2): 247–258.
Susanti, A., and Budidarsono, S. (2014). Land governance and oil palm development: examples from Riau Province, Indonesia. In Zoomers A., and Kaag M. (eds.), The great global land grab: beyond the hype, ZED Publisher, London, UK, pp. 119–134.
Swarna Nantha, H., and Tisdell, C. (2009). The orangutan–oil palm conflict: economic constraints and opportunities for conservation. Biodiversity and Conservation 18(2): 487–502.
van Garderen, K. J., and Shah, C. (2002). Exact interpretation of dummy variables in semilogarithmic equations. The Econometrics Journal 5(1): 149–159.
Vijay, V., Pimm, S. L., Jenkins, C. N., and Smith, S. J. (2016). The impacts of oil palm on recent deforestation and biodiversity loss. PloS ONE 11(7): e0159668.
von Agris, J. (2017). Rubber price drop, smallholder livelihood effects, and adaptation measures in Sumatra. Master’s thesis. Goettingen, Germany, University of Goettingen.
Wicke, B., Sikkema, R., Dornburg, V., and Faaij, A. (2011). Exploring land use changes and the role of palm oil production in Indonesia and Malaysia. Land Use Policy 28(1): 193–206.
Wilcove, D. S., and Koh, L. P. (2010). Addressing the threats to biodiversity from oil-palm agriculture. Biodiversity and Conservation 19(4): 999–1007.
Wilcove, D. S., Giam, X., Edwards, D. P., Fisher, B., and Koh, L. P. (2013). Navjot’s nightmare revisited: logging, agriculture, and biodiversity in Southeast Asia. Trends in Ecology & Evolution 28(9): 531–540.
Woittiez, L. S., van Wijk, M. T., Slingerland, M., van Noordwijk, M., and Giller, K. E. (2017). Yield gaps in oil palm: a quantitative review of contributing factors. European Journal of Agronomy 83: 57–77.
Wollni, M., and Andersson, C. (2014). Spatial patterns of organic agriculture adoption: evidence from Honduras. Ecological Economics 97: 120–128.
World Bank (2016). Official exchange rate (LCU per US$, period average). Washington DC, USA. Available online at http://data.worldbank.org/indicator/PA.NUS.FCRF, checked on 23.07.2016.
Acknowledgments
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.
Funding
This study was funded by Deutsche Forschungsgemeinschaft (DFG) (CRC 990).
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of Interest
The authors declare that they have no conflict of interest.
Ethical Approval
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
Informed consent was obtained from all individual participants included in the study.
Electronic Supplementary Material
ESM 1
(DOCX 77.9 kb)
Rights and permissions
About this article
Cite this article
Kubitza, C., Krishna, V.V., Alamsyah, Z. et al. The Economics Behind an Ecological Crisis: Livelihood Effects of Oil Palm Expansion in Sumatra, Indonesia. Hum Ecol 46, 107–116 (2018). https://doi.org/10.1007/s10745-017-9965-7
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10745-017-9965-7