Expropriation and the Location of Farmland Investment: a theoretical investigation into the Land Rush

Alfredo Rosete ()
Additional contact information
Alfredo Rosete: Department of Economics, University of Massachusetts, Amherst

No 2015-17, UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: Accompanying a sharp rise in food prices between 2007 and 2008 were reports of land deals in the global South. The sudden rise in land acquisitions in developing countries has drawn the attention of scholars and think tanks. In particular, a set of recent papers by Deininger (2011), Deininger (2013), and Arezki et al. (2013) sought to understand the empirical determinants of the land rush. They find that investors tend to target countries that have weak land-governance institutions, understood as the degree to which local land rights are upheld. This is a puzzle, given the economic literature on investment location. By locating in a country with weak land-governance, investors may be foregoing other advantages that generate more revenue. What does such a result say about both the nature of the investment projects, and the productive characteristics of the target countries? In this paper, I attempt to answer these questions using a game-theoretic model where investors can use expropriation as a credible threat, consistent with case studies and empirical data from actual land deals. I show that the credible threat of expropriation lowers the investor’s cost of locating to a country by reducing the necessary remuneration to smallholders for access to land, resulting in adverse incorporation. Further, I show that investors will locate in countries with weak land governance whenever they anticipate similar levels of revenue among the set of countries they target, or, whenever they can guarantee a similar level of investor protections.

Keywords: Land acquisitions; agribusiness; governance; contest games; investment location. (search for similar items in EconPapers)
JEL-codes: C79 F21 O13 Q15 Q34 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.umass.edu/economics/publications/2015-17.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ums:papers:2015-17

Access Statistics for this paper

More papers in UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics Thompson Hall, Amherst, MA 01003. Contact information at EDIRC.
Bibliographic data for series maintained by Daniele Girardi ( this e-mail address is bad, please contact ).