The dissertation consists of three substantive essays. The first essay has examined the linkages between secure property rights for agricultural land, agricultural productivity/intensity and potential outcomes for deforestation. We hypothesized that stronger land property rights could enable farmers to increase input intensity and productivity on the already cultivated land, thus reducing incentives to increase agricultural output by deforesting additional land. Our results show that formal land titles significantly increase agricultural intensity and productivity. However, due to land policy restrictions,
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farmers located at the historic forest margins are less likely to hold formal titles for the land they cultivate. We hypothesized that without land titles, these farmers are less able to intensify and might have been 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. Our results suggest that the property right insecurity induced by the unregulated deforestation activities of farmers, combined with the fact that at forest margins farmers can more easily increase output by extending farm size via deforestation is highly problematic. The reason is that the incentive patterns induced by insecure property rights might even accelerate further deforestation. In addition to improving farmers‟ access to land titles for non-forest land, better recognition of customary land rights and more effective protection of forest land without recognized claims could be useful policy responses.
In the second essay, we have examined whether local farmers in Indonesia benefit from cultivating oil palm, examining also temporal variation in the welfare effect, and whether oil palm cultivation has spillover effects on other farm households. Using different regression models, we show that oil palm cultivation contributes to higher household consumption, measured in terms of expenditures on food and non-food goods and services.
Oil palm has higher returns to labor than rubber, the main alternative cash crop in the region. However, returns to land are higher in rubber cultivation. The welfare gains are thus driven mainly by labor savings in oil palm cultivation. The lower labor requirements allow oil palm farmers to further expand their farmland and to reallocate saved labor to non-farm work. Due to declining rubber prices, the positive welfare effect of oil palm increased even more in 2015 compared to 2012. We do not find significant spillover effects of oil palm cultivation on neighboring farm households. Our results thus largely confirm the findings of the previous literature on the positive welfare effects of oil palm cultivation for smallholder farmers. Our findings also imply some important policy recommendations. First, policies aimed at regulating further oil palm expansion will have to account for the economic benefits for the local population. Second, part of the economic benefits of oil palm cultivation can be explained by labor savings in oil palm cultivation and the associated land expansion. To impede that land expansion leads to unregulated deforestation, it is of critical importance to improve forest and land governance. Since the economic gains of oil palm cultivation are substantial, small fines or low probabilities of
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conviction are unlikely to influence farmers‟ decision making and to deter further unregulated farm expansion. On the other side, high fines will adversely affect policy goals such as poverty reduction in rural areas. This suggests that improving governments‟
capacities to regulate land use, providing incentives for sustainable land use practices and alternative sources of income in rural areas might be more promising strategies.
While the introduction of new production technologies is often regarded as one of the key drivers of the historical fertility transition in the US and Western Europe, empirical evidence on the relationship between technology and fertility in a developing country context is largely inexistent. In the third essay, we address this gap by exploring why a labor-saving technology (crop choice) such as oil palm decreases fertility in rural Indonesia. Based on the current literature but also micro-level plot data, we show that oil palm indeed induces large labor savings per hectare compared to competing crops. We then use Becker‟s quantity-quality model to identify different causal mechanism through which the expansion of oil palm could affect fertility rates. 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.
Our 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. From a policy perspective focused on female empowerment and reducing population growth, this indirect effect of the oil palm boom is certainly welcomed. However, to harness this effect more effectively, policies that improve female education and access to the non-agricultural employment are necessary.
This does not mean that oil palm expansion is an effective instrument for rural development. The detrimental effects on ecosystem functions are widely documented as well as equity issues and land conflicts. Understanding the socioeconomic effects of the oil palm expansion may, however, contribute to design more sustainable agrarian systems.
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