With the emergence of biodiesel and the need to improve the socioeconomic situation in Indonesia by developing the oil palm sector, an analysis is needed to determine whether conditions have actually improved. Using accounting multiplier decomposition and structural path analysis for a simulation of one unit increase in biodiesel's production, this paper aims to empirically analyze whether the emergence of the biodiesel industry has impacted the oil palm sector in Indonesia. Decomposition captures various mechanisms and linkages within a socioeconomic system by a social accounting matrix (SAM). Structural path analysis identifies the transmitted influence network within SAM. Our results show an indirect effect on oil palm and improvement in the economic conditions. Therefore, development of the Indonesian economy depends upon the integration of biodiesel production and oil palm expansion through sufficient incentives and government financing. © 2010, JAPAN SECTION OF THE REGIONAL SCIENCE ASSOCIATION INTERNATIONAL. All rights reserved.