Farmland Investments in Africa: What’s the Deal?
Large-scale foreign investments in African farmland are rising and may contribute to agricultural productivity growth and economic development. However, host countries sometimes have to wait longer for the economic bene…ts to arrive than initially expected. In this respect, the timing of project development is crucial and depends on the economic incentives provided to the investors. We therefore present a dynamic stochastic programming model that re‡ects the typical bargaining situation concerning large land deals in Africa and allows the e¤ect of market- and country-speci…c risks and taxation to be assessed. The model 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 …xed commitments to the speed of project development may run counter to the structure of economic incentives at the project site. The applicability of the model is demonstrated for a recent 10,000-hectare cotton project in Ethiopia. Response surface estimations suggest that Ethiopia has negotiated a contract under which it will receive about half the expected total project value, as long as it levies the regular corporate tax rate.
|Date of creation:||13 Dec 2013|
|Contact details of provider:|| Postal: Department of Economics, Box 7013, Swedish University of Agricultural Sciences, SE-750 07 Uppsala, Sweden|
Phone: 018-67 1724
Fax: 018-67 3502
Web page: http://www.slu.se/ekonomi
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Collier, Paul & Venables, Anthony J, 2011.
"Land deals in Africa: pioneers and speculators,"
CEPR Discussion Papers
8644, C.E.P.R. Discussion Papers.
- Paul Collier & Anthony J Venables, 2012. "Land Deals in Africa: Pioneers and speculators," OxCarre Working Papers 069, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
- Klaus Deininger & Derek Byerlee & Jonathan Lindsay & Andrew Norton & Harris Selod & Mercedes Stickler, 2011. "Rising Global Interest in Farmland : Can it Yield Sustainable and Equitable Benefits?," World Bank Publications, The World Bank, number 2263, May.
- G. Cornelis van Kooten & Robert A. Schipper, 2002. "Forest Conservation in Costa Rica when Nonuse Benefits are Uncertain but Rising," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 150-160.
- Di Corato, Luca, 2013. "Profit sharing under the threat of nationalization," Resource and Energy Economics, Elsevier, vol. 35(3), pages 295-315.
- Luca Di Corato, 2010. "Profit Sharing under the Threat of Nationalization," Working Papers 2010.5, Fondazione Eni Enrico Mattei.
- Di Corato, Luca, 2010. "Profit Sharing under the Threat of Nationalization," Working Papers 58292, Swedish University of Agricultural Sciences, Department of Economics.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Feng Song & Jinhua Zhao & Scott M. Swinton, 2011. "Switching to Perennial Energy Crops Under Uncertainty and Costly Reversibility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(3), pages 764-779.
- Song, Feng & Zhao, Jinhua & Swinton, Scott M., 2009. "Switching to Perennial Energy Crops under Uncertainty and Costly Reversibility," Staff Papers 56195, Michigan State University, Department of Agricultural, Food, and Resource Economics.
- Schatzki, Todd, 2003. "Options, uncertainty and sunk costs:: an empirical analysis of land use change," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 86-105, July.
- Clark, Ephraim, 1997. "Valuing political risk," Journal of International Money and Finance, Elsevier, vol. 16(3), pages 477-490, June.
- von Braun, Joachim & Meinzen-Dick, Ruth Suseela, 2009. ""Land grabbing" by foreign investors in developing countries: Risks and opportunities," Policy briefs 13, International Food Policy Research Institute (IFPRI). Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:hhs:slueko:2013_010. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Hillerius)
If references are entirely missing, you can add them using this form.