Spillovers to Manufacturing Plants from Multimillion Dollar Plantations: Evidence from the Indonesian Palm Oil Boom

Sebastian Kraus, Robert Heilmayr and Nicolas Koch

Journal of the Association of Environmental and Resource Economists, 2024, vol. 11, issue 3, 613 - 656

Abstract: We estimate spillover effects to local manufacturing plants from the Indonesian palm oil boom, using a stacked difference-in-differences approach. We use new data on the establishment dates and ownership of palm oil mills to identify clean shocks from investments in new plantations. Local plantation booms increased sales and productivity of manufacturing plants, despite increasing blue-collar wages. Using confidential input-output data, we rule out the possibility that this effect is driven by supply chain linkages. Plants increased their share of tradable goods. Local road upgrades point to improved market access as an explanation for this shift.

Date: 2024
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