Land-use transformation and conflict: The effects of oil palm expansion in Indonesia

Abstract

Agricultural commodity booms can improve rural employment and livelihoods, but also accelerate land-use change in rural areas. Where land-use rights are unclear and economic institutions non-cohesive, such booms can trigger social conflict over land. We investigate this phenomenon in Indonesia, where rising global demand for palm oil caused a large expansion in production area over the past decades. Based on a yearly panel of 2,755 rural sub-districts from 2005 to 2014, we link highly detailed data on local outbreaks of conflict to variations in plantation expansion incentives. We show that local incentives to establish new plantations lead to violent disputes over land, resources and political representation, an effect that is distinct from the impact of income shocks in already established production areas. The adverse consequences increase with the importance of land rents as an income source, and are more pronounced in areas where land is more contestable and unequally distributed, as well as during local elections. Our findings underline the importance of Indonesia’s ongoing land reform efforts and the necessity of rural land transformation to go hand in hand with conflict mitigation strategies.

Keywords: conflict, resources, palm oil, land-use change, Indonesia

JEL Classification: O13, Q15, Q33, Q34, R11