Trans-border Land Acquisitions:A New Guise of Outsourcing and Host Country Effects

The rush for land acquisition—primarily driven by food shortage and run for agrofuel—has drawn considerable attention. Some documents published in late 2009, 2010, and 2011 report this phenomenon. Terminological differences aside, it is—quite distinct from materials or service outsourcing—kind of off-shoring farm production to relatively land-abundant nations across borders and exporting them back to mitigate the adverse effects of food insecurity. While the academic literature is not capacious, this paper, first of its kind, attempts to study its (potential) effects in the context of a small open economy subject to exogenous shocks. The presence of a sector subject to land acquisition is central in the analysis. In particular, it furnishes that: (i) increase in world price of agro-business sector causes skewed effects (shrinkage) in manufacturing or innovative sectors, and subsistence sector (via forward and backward linkages), causing vulnerability to price changes; (ii) with attractive premium offered by host, land acquisition will undermine the avowed objective of mitigating food shortage and aggravate income inequality in the host; (iii) technological progress or inducing technological efforts via skill, capacity building, infrastructure developments will have favorable effects if host countries adopt favorable policy climate to foster governance, and education for revitalizing agriculture. Further extensions to address pertinent (stylized) facts are also explored.