Investment Treaties, Local Institutions and Policies in the Global Land Rush

Abstract

Large-scale land acquisitions (LSLAs) are large tracts of land purchased or leased in low- and middle-income countries by multinational firms. This study examines whether these firms respond to the presence of bilateral investment treaties (BITs), whether BITs reinforce or undermine institutions in this process, and whether these firms respond to recipient-country environmental regulations. It analyzes data on LSLAs, BITs, and environmental policies from 2002 to 2012 in a gravity framework controlling for country-pair and time fixed effects. It finds a BIT is associated with a 96 to 149 percent increase in land deals and a 1 point increase in a recipient country's environmental protection index is associated with around a 36 percent decrease in the total amount of land investors lease or purchase in a country. Interactions between BITs and institutional measures in recipient countries yield large relationships with the number of LSLA deals between countries, although these are statistically insignificant.