Impacts of Farmers Group on the Technical Efficiency of Oil Palm Production in Indonesia: An Application of Stochastic Frontier Analysis

Abstract

Agricultural sector in Indonesia plays an important role in raising rural livelihood, as it is becoming the main source of national income. Sustainable oil palm cultivation is emphasized in Indonesia Long-term Development Plan as one of the potential sectors in agriculture. This policy implementation has provided employment opportunity and generate income for smallholder farmers. On the other hand, there were productivity gap among smallholder farmers because of the background of farming practices. The present study aimed to investigate oil palm productivity of smallholder farmers with stochastic frontier approach to provide evidence on agricultural practices that were beneficial to enhance the productivity of oil palm. The results observed several socio-economic factors that can lead to the increasing of farmers’ efficiency, such as farmers group, extension program, education, and farm diversification. Empirical results were expected to provide better input to the government, in order to improve the policy regarding with the land expansion in oil palm sector.