It is encouraging to read the post from Aid Thoughts. We appreciate the time he put into Oxfam’s analysis on large scale land deals. Indeed, we were hoping that our blog would spark debate and bring more attention to this topic.
As a quick summary, we took two databases, the Land Matrix and the World Governance Indicators and found that land deals are more likely to occur in countries with lower levels across different governance indicators. We specified that “This analysis is only the first step towards a more in depth research project. Next steps include a more in depth analysis on the determinants of the number and location of deals”
Aid Thoughts seems to take issue with the use of this kind of analysis when they are so preliminary. There are two things to say to this: Firstly, and as Aid Thoughts acknowledges, there is other evidence in the development literature that points to the fact that land deals are concentrated in poorly governed countries. Our conclusions were not based only on our analysis and we used the best evidence at hand (both internal and external) to generate a better understanding of the problem (which Aid Thoughts actually helped with his critical review). So, we stand by our decision to publish the preliminary results.
Now, there are a couple of things to discuss on the technical front of his critique. Here are some:
1) Investors or governments?
AidThoughts replaces governance indicators with income per capita because they better explain the existence of land deals. This leads him to suggest that “Maybe investors aim for countries who are more willing to sell off land, not because they are poorly governed, but just because they are poor.” This is an interesting idea but if we put aside the regression tables and reflect for a moment, is it sensible to think that land investors are attracted to countries for being poor? Why would investors be attracted to the characteristics of poverty, such as poor infrastructure, limited public services and low levels of education and health? A more interesting hypothesis that AidThoughts raises, and which we think is worth exploring too, is that it might not be investors who target countries, but bad governments who sell the land of their citizens.
2) Truncated sample bias.
AidThoughts recognizes that running OLS with two control variables, as reported in Table 3, is not serious analysis (and yet he managed to muddle the significance of the estimators in his table). But what’s really puzzling is that, in order to prove his point, he then goes on to throw the entire kitchen sink of governance indicators into the next table (Table 4). These indicators are highly correlated amongst them, and it is difficult to find a sensible explanation to specify the model that way.
He then goes on to say of this table:
“In column (1), prior controlling for income, only one of the relationships we expected to see has returned: countries rated low on the rule of law index are more likely to have land deals. Political stability/violence is also associated with land deals, but unfortunately that wasn’t part of Oxfam’s theoretical model. Now, voice and accountability is positively correlated with land deals! Of course, most of these relationships vanish when we toss in income, although it is worth noting that the rule of law measure keeps its significance and sign. So the relationship between governance and land sales seems to be a lot more complex than the Oxfam brief is suggesting.”
That’s a lot of explanation for a badly specified model that includes highly correlated regressors. But that’s not even the most puzzling part of that table. AidThoughts then tries to explain the number of land deals with the same variables but he does not correct for the truncated sample (look how his sample drops from 212 and 183 in the first two columns to just over 50 in the last two). Ignoring the bias in the observed sample is a mistake and something we had identified as a problem, and that’s why we suggested exploring a double hurdle estimation to understand the issue better.
3) Reported land deals bias.
Aid Thoughts briefly mentions the potential problem of bias in the Land Matrix, but we don’t agree that he identified the right direction of bias. He argues that land deals are more likely to be reported in developing countries by diligent activists than in developed countries like the UK. On the contrary, we argue that land deals are much less likely to be ignored in richer countries with freer press, more access to information and better organized civil societies. Does Aid Thoughts seriously believe that a land deal can be more easily concealed in the UK than in the DRC?
Overall, we are very encouraged by Aid Thoughts’ response. He mentions that he can be convinced of the problem with more data and more, better data is on its way according to conversations we’ve had with the people managing the Land Matrix. So here’s our proposal for Matt: let’s work together – rigorously and objectively – on this issue in the next few months to try to better understand what’s driving the land rush. The problem deserves as much attention as we can give to it.