The Impact of Oil Palm Farming on Household Income and Expenditure in Indonesia

Indonesia is the largest exporter of palm oil in the world. The province of West Sulawesi is the second-largest palm oil producer in Indonesia. This study examines the contributions of oil palm farming to total household income and the factors affecting the household expenditure of oil palm smallholders in West Sulawesi, Indonesia. This study also identifies the problems related to oil palm production in the province. Primary data were collected from 174 oil palm smallholders using a standardized questionnaire in the Lariang sub-district, Pasangkayu, West Sulawesi, Indonesia. Several statistical tools were employed to analyze the data. The study estimated the average household income of the smallholders at IDR 30,417,441 per year, out of which 85,8% comes from oil palm farming, followed by non-oil palm farming (8%) and off farming (6.2%). On the other hand, the average household expenditure was found to be IDR 23,476,069 per year which 66% goes for food consumption and 34% for non-food consumption. The findings revealed that household expenditure of the oil palm smallholders is strongly and positively affected by a number of factors such as household income, education level, family size, earning members in the family, number of children attending school, and amount of credit taken by the household.