Oil Palm Yield and Social Networks: Evidence from Riau Province, Indonesia

Abstract

This study investigates the effects of social networks on land productivity of oil palm smallholders, using the case of Riau Province in Indonesia, where oil palm cultivation is the most prevalent. We interpret land productivity as a proxy for farmers’ cultivation proficiency and apply quantile regression to capture the heterogeneity in farmers’ cultivation knowledge and experience by the distribution of the dependent variable, land productivity. Our results reveal that the effect of social networks on increasing land productivity is greater for farmers with lower land productivity and smaller for those with higher land productivity. This suggests that farmers with low cultivation proficiency, and consequently low productivity, are more likely to perceive information obtained through social networks as novel and useful to them, leading to higher productivity gains. Conversely, farmers with initially high cultivation proficiency are more likely to find the obtained information already known to them, making it difficult to achieve further productivity improvements. These findings support our hypothesis that farmers with lower cultivation proficiency and productivity are more likely to benefit from social networks.