Oil palm cultivation improves living standards and human capital formation in smallholder farm households

Abstract

Oil palm cultivation is a controversial topic because of its manifold sustainability implications. Recent research in Southeast Asia suggests that oil palm cultivation is associated with income gains for many smallholder farmers, but whether these income gains also translate into longer-term improvements in household living standards remains unclear. Here, we use three rounds of panel data from smallholder farmers in Sumatra, Indonesia, to analyze effects of oil palm cultivation on various indicators of living standards. Results suggest that oil palm cultivation improves nutrition, dietary quality, and expenditures on education, all important indicators of human capital formation with expected positive long-term implications. Furthermore, we find positive associations between oil palm cultivation, household asset ownership, and electricity consumption, after controlling for possible confounding factors. We conclude that oil palm cultivation improves living standards and human capital formation in smallholder farm households in this setting.