International Land Acquisitions Comparative Advantage and Mutual Welfare

The analysis of large scale land acquisition and its relative impact on poverty alleviation are important development issues. The overall objective of this study is to examine the effect of foreign direct investment (FDI) in agricultural land on the welfare of host nations. The study also considers the role of good governance and strong institutions in harnessing FDI in agricultural land and for ensuring efficient use of investment funds that will generate economic growth and enhance welfare. Findings are expected to help enable policy makers to consider elements that hamper or enhance spillovers of foreign holdings of agricultural land. For the purpose of this study, data consist of two parts - land deals for which contracts were signed and those at the execution status. Land deal data on signed contracts obtained from the Global Observatory of the Land Matrix are discrete annual time series data with highly irregular observations and thus with many missing data points. To enable analysis of the data we applied a rule to solve the omission problem resulting in a panel dataset with 33 countries observed over the period from 2008 to 2011. A linear regression with one dependent variable and seven explanatory variables was used to evaluate the fixed effect model. The regression results confirm the hypothesis for this study and suggest that FDI in agricultural land improves the welfare of host nation. The results also affirm the essential role of effective governance, strong institutions, trade openness and domestic savings in augmenting welfare