Is Land Grabbing Poverty Reducing? A Theoretical Analysis

Abstract

In light of the 2007-2008 global food, fuel and financial crises, ”land grabbing” has attracted media spotlight due to concerns over welfare of farmers in these ”renter” countries, and the secrecy around the content of the deals signed. ”Land grabbing” is farmland’s acquisition or rental in developing countries by foreign entities (countries or corporations) to ensure notably their food or raw material supplies. But what are the impacts of this ”land grabbing” on the welfare of the most vulnerable populations (the farmers)? This paper is one of the first to attempt to answer this question by developing a monopsony-type price model to analyze the welfare impacts on farmers of a change of the land ownership. The model takes into consideration transaction costs, spatial competition and international commodity price volatility. Even if the main result is not clear-cut, overall, farmers are likely to be worse off (losers), especially those that were well off prior to the land grabbing. On the other hand, farmers in geographically remote areas may be better off (winners). The main policy recommendation of the paper is directed towards governments of developing countries to allow and develop a lucrative farming business environment to implement the benefits of the land grabbing without having to lease or sell its arable lands.