Brownbag Seminar “Buoyed by the boom? Regional Effects of Commodity Price Increases in Indonesia”

Virtual Event

SDG Center and Economics Doctoral Program of Unpad invites you to the Brownbag Seminar, 6th Jan 2017

“Buoyed by the boom? Regional Effects of Commodity Price Increases in Indonesia”

by Allison Derrick, University of Wisconsin – Madison/ PhD Visiting Fellow of SDG Center Unpad
discussant: Dr. M. Purnagunawan (Unpad/TNP2K)
chair: Dr. A. Kemal Hidayat

“In 2010, Indonesia produced over 18 million tons of palm oil, or roughly 45 percent of global supply, making the nation one of the world’s leading palm oil producers. The palm oil boom attracted foreign investment and brought in foreign exchange, but also had a large impact on local communities, particularly workers and landowners, in affected regions. In many palm oil producing areas, located in Indonesia’s outer islands, the poverty rate is higher than on the most populous island of Java. Additionally, roughly two thirds of rural households depend on agriculture as their main source of income. Palm oil production is extremely labor intensive relative to other commodities that Indonesia exports, particularly oil, gas, or coal. These industries involve relatively capital intensive production activities, which have less potential to absorb labor. Recent evidence shows that the oil palm boom lifted at least 1.2 million (mostly rural) Indonesians out of poverty. The effects of the boom for workers’ incomes are likely large because of the scale of the boom and the labor intensive nature of palm oil production. So the massive expansion of the palm oil industry in Indonesia suggests there are large welfare impacts because of this labor-intensive industry’s potential to increase employment and incomes in affected areas. In this presentation, I will sketch a theoretical model to generate general equilibrium predictions and explore methods to estimate the labor market effects of the boom.”

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