How Institutions Shape Land Deals

Critical large-scale land acquisitions (LSLAs) concentrate in countries which are also known for their weak institutions. We argue that weak institutions are a facilitating factor for LSLAs. To pursue their personal interests, corrupt central and local elites strike deals with investors, possibly at the expense of the local population. Using panel data for 159 countries from 2000-2011 and different estimation techniques, we provide evidence that land grabs indeed occur more often in countries with higher levels of corruption. Although anecdotal evidence suggests that the most corrupt countries may have fewer land deals because of their unpleasant institutional environment for foreign direct investment, we do not find evidence for this hypothesis. Our findings instead suggest that reduced corruption helps to foster economic development via a reduced number of land deals and more realistic land prices. Corruption control may therefore also benefit the local population in terms of less (or fairer) LSLAs.