Investing in agriculture: A preference for democracy or dictatorship?

Abstract

Driven by food crises and constraints on natural resources, investors are increasingly leasing or purchasing farmland abroad. This study systematically tests which political institutions attract these investors. I argue that food scarcity concerns incentivize foreign investors in agriculture to prioritize unopposed, quick deals above other predicted factors such as low political risk. I thus predict that investors will invest in nondemocratic hosts and hosts with weak laws to ensure fast negotiations, easily transferred land, and minimal citizen opposition. Panel regressions corroborate that the rule of law is statistically insignificant and democracy is negative and statistically significant in predicting agricultural foreign direct investment (FDI) inflows.