Institutional environment and land purchase by foreigners in developing countries

Abstract

According to the World Bank, from the late 2000s, the movement of land acquisition has been accentuated by non-national in developing countries, driven by the boom in commodity prices. In theoretical terms, the approach of New Institutional Economics (NIE) argues that institutions are important in the strategies of economic agents and their performance. This study aims to answer how the institutions present in the peripheral countries reflect the process of land acquisitions by foreign investors. This research, backed by the NIE, aims to examine the acquisition of land by foreigner. For this objective, secondary data has been used from international organizations such as Food and Agriculture Organization, World Bank, United Nations Conference on Trade and Development, International Monetary Fund, Organization for Economic Co-operation and Development, Wall Street Journal and national agencies. The main hypothesis is that the strength or weakness in this institutional environment in developing countries have significant influence on the level of Foreign Direct Investment (FDI). So on this methodology is adopted as statistical analysis, which assesses the relationship between the level of FDI in host countries (dependent variable) against independent variables, institutional: investment freedom, property rights and corruption level. It is expected that countries with weak institutional environments, or less safe ones, tend to receive lower investments in land purchases and leases than other countries that have an institutional framework that guarantees property rights.