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Farmland Investment in Africa: What’s the Deal?

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Listed:
  • Di Corato, Luca
  • Hess, Sebastian

Abstract

We present a dynamic stochastic programming model that reflects the typical bargaining situation concerning large land deals in Africa. The model allows assessing the effect of market- and country-specific risks and taxation. It shows that commodity price volatility increases the value of the land development option, but slows down the land development process. Furthermore, it shows that host country attempts to negotiate fixed commitments to the speed of project development may run counter to the structure of economic incentives at the project site. Finally, the applicability of the model is demonstrated for a recent 10,000-hectare cotton project in Ethiopia.

Suggested Citation

  • Di Corato, Luca & Hess, Sebastian, 2014. "Farmland Investment in Africa: What’s the Deal?," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182806, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:182806
    DOI: 10.22004/ag.econ.182806
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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