Spillovers from agricultural processing

This paper uses the proliferation of palm oil factories across Indonesia’s undeveloped
hinterland to study industrial onset and estimate spillovers from agricultural processing.
The main nding is signs of urbanization and structural change around factories: more
non-agricultural employment, higher incomes, and more people, rms, and other economic
and social organizations. These patterns are largely explained by economic linkages,
infrastructure and other public goods, and economies of scale in production. By focusing on
subsistence rural regions in a large developing economy, this paper adds a globally-signicant
new case to a growing literature emphasizing the importance of agglomeration externalities
for understanding the birth of new towns, the spatial distribution of economic activity, and
structural transformation.