|Changes in land use, such as deforestation, expansion of sedentary agriculture and intensification of agricultural systems, significantly altered economic and ecological conditions in many regions of the world. In recent decades, one of the most rapid changes in land use was the expansion of plantation crops and the associated loss of tropical rainforests. In particular, oil palm expanded rapidly due to the increasing global demand for vegetable oil and the high land productivity of oil palm compared to other oil crops. One of the countries where the expansion of oil palm has been particularly strong during the last 25 years is Indonesia. The oil palm acreage in Indonesia increased from about 1 million hectares in 1990 to 12 million hectares in 2016. A number of studies have shown that the oil palm expansion led to increasing welfare of smallholder farmers. However, oil palm expansion was also found to aggravate ecological hazards such as greenhouse gas emission and biodiversity loss, not only by replacing the natural ecosystem functions of forests but also by replacing less-intensive agricultural production systems (e.g., rubber agro-forestry). The positive economic effects in the smallholder sector and the negative ecological effects depict a strong trade-off for policy-makers. In order to mitigate such trade-offs and ensure economic and ecological sustainability of agrarian systems, detailed studies of the impacts and determinants of land-use change are indispensable. The dissertation contains three essays on the impacts and determinants of land-use changes in Indonesia. The first essay explores the pathways through which secure property rights curb deforestation via land-sparing intensification. The second essay discusses the effect of oil palm cultivation on smallholder farmers’ welfare. The last essay investigates the impact of oil palm expansion on human population growth assessed in terms of women’s fertility rates (number of live birth per woman) channeled through income gains, rising returns to education, and other mechanisms.
The expansion of agricultural land remains one of the main drivers of deforestation in tropical regions, with severe negative environmental consequences. The first essay hypothesizes that stronger land property rights could enable farmers to increase input-use intensity and productivity on the already cultivated land, thus reducing incentives to expand their farms by deforesting additional land. The current literature on the land property rights and deforestation analyzed primarily the effects of secure forest property rights on protecting forest from encroachment. For agricultural land, studies have focused on the effects of secure property rights on input intensity and crop productivity. Examining the potential effects of secure property rights for agricultural land on deforestation via agricultural intensification was rarely explored in the literature. To test our hypothesis, we compiled a data set using various kinds of data, including a panel survey of farm households in Jambi, Sumatra, satellite imageries from LANDSAT to account for spatial patterns, such as historical forest locations and data on topsoil characteristics of farmers’ plots. Results show that plots for which farmers hold formal land titles are cultivated more intensively and are more productive than untitled plots, even after controlling for other relevant factors such as soil characteristics. However, our results also show that, due to land policy restrictions, farmers located at the historic forest margins are less likely to hold formal titles for the land they cultivate. We assume that without land titles, these farmers are less able to intensify and more likely to expand into the surrounding forest land to increase agricultural output. Indeed, historic forest closeness and past deforestation activities by households are found to be positively associated with current farm size. The findings suggest that unregulated deforestation activities of farmers in combination with insecure property rights for the appropriated land are not conducive for forest conservation. Farmers with insecure property rights face incentives for extensive rather than intensive production systems, which could lead to even further deforestation if land and forest governance is weak.
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. The second essay examines the welfare effects of oil palm cultivation for smallholder farm households. Unlike other related studies that have used cross-section data, our analysis builds on panel data. Farm household data were collected from 683 farm households in Jambi, Sumatra, in two survey rounds, 2012 and 2015. The results show that oil palm cultivation has significant positive effects on farmers’ consumption expenditure, our proxy of household living standards. Lower labor requirements allow oil palm farmers to further expand their farmland or reallocate the saved labor to non-farm economic activities, thus contributing to additional secondary income gains. We further test if oil palm cultivation leads to spillover effects on neighboring farm households. We find no such spillover effects, suggesting that the overall effect for the farming community is positive. The results further show that the positive welfare effect depends on the relative price of palm oil compared to rubber, the main competing crop in the region. Our results suggest that policies aimed at regulating further oil palm expansion will have to account for the economic benefits that this crop offers to the local population.
While we provided evidence of positive income (consumption expenditure) effects of oil palm for cultivating farmers, we expect that the ramifications of the rapid expansion of oil palm may be more far-reaching, potentially also affecting some of the underlying determinants of economic development, such as population growth. The proliferation of new production technologies is often regarded as one of the key drivers of the historical fertility transition in the US and Western Europe. In contrast, empirical evidence on the relationship between technologies, including crop choice, and fertility in developing countries such as Indonesia is largely inexistent. The third essay of this dissertation addresses this research gap, exploring the effect of oil palm expansion on fertility in Indonesia using a range of different data sources at the regency level. Oil palm is less labor-intensive than some of the alternative crops such as rubber or rice. Hence, in a land-scarce setting, the substitution of oil palm for other crops induces labor savings similar to mechanization. We use Becker’s quantity-quality model to identify different causal mechanism through which the expansion of oil palm could affect the number of children born to a woman (fertility). Our identification strategy relies on an instrumental variable approach with regency-fixed effects, in which the expansion of area under oil palm at regency level is instrumented by regency-level attainable yield of oil palm interacted with the national oil palm expansion. While a labor-saving technology could theoretically increase fertility rates by decreasing maternal opportunity costs of time, we find consistently negative effects of the oil palm expansion on fertility. The results suggest that income gains among agricultural households coupled with broader local economic development explain this effect. Specifically, local economic development seems to have raised returns to education and triggered investments into women’s and children’s education, which together with direct income effects explain the bulk of the negative effect of the oil palm expansion on fertility.
Overall, our findings are in line with previous studies, suggesting that smallholder-driven oil palm expansion has on average positive socioeconomic effects. However, the negative ecological effects are also widely documented. Our research underlines that having secure and clear property rights for agricultural land and forest as well as access to the non-agricultural sector might be important steps towards more sustainable land-use systems in Indonesia.