Abstract
This paper examines the effect of land market liberalization on the dynamics of capital accumulation. It is shown that the land market liberalization, which is accompanied with the transfer of agricultural technology, may not always offer a “win‐win” outcome for developed and developing countries. Improved agricultural productivity generates a growth enhancing externality. However, land market liberalization affects the balance between the equalizing force of the diminishing returns technology and the un‐equalizing force of the low income elasticity of the agricultural commodity demand. As a result, land market liberalization accompanied with the transfer of agricultural productivity, may not always guarantee a “win‐win” outcome for developed and developing countries. If improvement of agricultural productivity is insignificant then land market liberalization can cause “win‐lose” situation for developed and developing countries. This result suggests that one should be very careful in a policy proposal designed to foster the process of development through foreign land ownership. It is important to recognize that apart from benefits, foreign land ownership also creates a disadvantage for capital accumulation and causes the magnification of the world income inequality.JEL classificationF43, O11, R14
Highlights
Food prices, which almost doubled between 2006 and 2008, had a major impact on the perception of food insecurity
The main goal of this paper was to analyze the effects of land market liberalization and the transfer of agricultural technology on the dynamics of capital accumulation and on long run welfare
The main results of the paper suggests that a policy maker should be careful to use only positive feedback mechanisms that the foreign land ownership can create for economic development, because in reality, several different links co-exist between the foreign land ownership right and the long run economic development
Summary
Food prices, which almost doubled between 2006 and 2008, had a major impact on the perception of food insecurity. Rising food prices hit hard to the balance of payments of many food importing countries. In order to insure themselves, those countries started to acquire farmland under their control. Reports from the International Food Policy Research Institute (IFPRI) estimate that during the last decade tens of millions of acres of farmland has been acquired by countries where the consumption of agricultural commodities far exceeds the production (see Von Braun and Meinzen-Dick (16) for more details). Land acquisitions are occurring mainly in developing countries like Brazil, Cambodia, Indonesia, Laos, Madagascar, Pakistan, Philippines, Uganda, Sudan and others, where production costs are relatively low and where land and water resources are more abundant than in the investor nation (see Vidal (15), Cotula et al (5), and Allen (1), for more details)
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