Labor Displacement in Agriculture: Evidence from Oil Palm Expansion in Indonesia

Abstract

We analyze the labor market effects of oil palm cultivation among smallholder farmers in Indonesia. Oil palm requires less labor per unit of land than alternative crops, especially less female labor. Microlevel data and nationally representative regency-level data show that oil palm adoption, on average, led to an expansion of total cropland at the expense of forestland, resulting in higher agricultural labor demand for men. At the same time, women’s employment rates declined due to a substantial decrease in agricultural family labor, which was most evident in regions with high initial land scarcity and thus limited options for cropland expansion.