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A Household Welfare Perspective on the Expansion of Palm Oil Production in Indonesia

Author

Listed:
  • Outi Korkeala

    (Department of Economics, University of Sussex, UK)

  • Krystof Obidzinski

    (CIFOR, Bogor, Indonesia)

Abstract

Palm oil production potentially affects environment, food security and rural development in Indonesia. However, there is little research on the welfare impacts of the production expansion. By using district level data on palm oil production and area planted and national household survey (SUSENAS), this paper studies the impact of the expansion of the palm oil production on household expenditure and health. Instrumental variable estimates exploit the historical production and district forest area as an exogenous source of variation. We find that smallholder production has a negative effect on household expenditure but this effect is not present among rural households. More, total cultivated area increases prevalence of asthma in Kalimantan. The results suggest that palm oil is not a panacea to increase rural welfare and that there is no evidence of positive spillover effects.

Suggested Citation

  • Outi Korkeala & Krystof Obidzinski, 2012. "A Household Welfare Perspective on the Expansion of Palm Oil Production in Indonesia," Working Paper Series 4212, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:4212
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    File URL: http://www.sussex.ac.uk/economics/documents/wps-42-2012.pdf
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    More about this item

    Keywords

    Biofuels; health; household welfare; Indonesia; palm oil;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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