Abstract
Deforestation in Indonesia has been a major problem for many decades, with rates of logging still high and worrisome for one of the most important ecosystems on Earth. The rise and sustained rate of deforestation in Indonesia has been attributed to a variety of causes, with some pointing to the 20th-century voluntary mass resettlement - called Transmigration Program - of Javanese and Balinese individuals to the ”Outer Islands” of the country, until then sparsely populated by indigenous groups. Using the Transmigration Census of 1998 together with Census data and the novel Forest Landscape Integrity Index, this paper estimates the environmental externalities that the Indonesian Transmigration Program created on Indonesian forests. Results show that transmigrant villages are significantly more destructive to their ecosystems, especially when the share of indigenous people allowed to join the village is lower. Moreover, there is evidence that villages turned to more damaging palm oil plantations to cope with the low rice productivity of their randomly assigned locations, rather than high suitability of palm oil cultivation. Ethnic fractionalization has a strong positive impact on ecosystem integrity, a surprising result in contrast to some of the existing literature. This research suggests that the Transmigration Program produced long-term negative environmental effects by creating economically vulnerable communities with little knowledge about their resources.