Farmer heterogeneity and differential livelihood impacts of oil palm expansion in Sumatra, Indonesia

We examine the impact of oil palm expansion on smallholder livelihoods in Indonesia, using farm-household survey data. Treatment-effects and endogenous switching regression models suggest that smallholders benefit from oil palm adoption on average. Part of the benefit stems from the fact that oil palm requires less labour than rubber, the main alternative crop. This allows oil palm adopters to allocate more labour to off-farm activities and/or to expand their farmland. Households with a lower land-to-labour ratio are typically better-off with rubber. Depending on various social and institutional factors, households’ access to land, labour, and capital varies, contributing to impact heterogeneity.