Oil palm expansion among smallholder farmers in Sumatra, Indonesia
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Many tropical regions experience a rapid expansion of oil palm, causing massive land use
changes and raising serious environmental and social concerns. Indonesia has recently become
the largest palm oil producer worldwide. While much of the production in Indonesia comes from
large-scale plantations, independently operating smallholders are increasing in importance and
may dominate production in the future. In order to control the process of land use change, the
micro level factors influencing smallholder decisions need to be better understood. We use data
from a survey of farm households in Sumatra and a duration model to analyze the patterns and
dynamics of oil palm adoption among smallholders. In addition to farm and household
characteristics, village level factors determine oil palm adoption significantly. Independent
smallholders adopt oil palm especially in those villages that also have contracts and out-grower
schemes, leading to a regional path-dependency of former government policies.