Buoyed by the boom? Household Expenditure among Indonesian Palm Oil Producers
Presented by:
Allison Derrick
Practice Job Talk
Department of Agricultural & Applied Economics
University of Wisconsin - Madison
Thursday, November 16, 2017
3:45 pm-5:00 pm
Taylor-Hibbard Seminar Room (Rm103)
Broad-based agricultural booms are expected to improve household income and consumption and reduce poverty, yet the result of a subsequent bust is unclear. This paper asks whether household expenditure increases during the palm oil boom and bust in Indonesia. I estimate changes in household spending according to plantation production structures, which determine income exposure to palm oil price changes. I find that income shocks from palm oil price changes pass through to household expenditure. In districts dominated by smallholder plantations, average expenditures rise during the boom and fall by the same magnitude during the bust. In districts dominated by large plantations, household expenditures do not significantly change during either period. Spending on health is more responsive to price changes, increasing faster than total spending during the boom and falling faster during the bust. In contrast, spending on education does not change during the boom, yet decreases during the bust. In sum, palm oil production does not necessarily benefit Indonesian households because improvements in household expenditure depend on the global price.