Drivers of agricultural foreign divestment

This paper has used multilateral foreign divestment (FD) data covering 1991 to 2017 for 50 countries, fitted to an optimised model based on microeconomic theory, to estimate the drivers of FD out of agriculture. Identifying the factors that determine FD would offer an opportunity for policymakers to know what kind of policies can discourage FD. Furthermore, knowledge of the directional effect would offer a way to use the policy variables to appropriately influence FD. Market size, exchange rate, political regime characteristics and transitions as well as the level of development drive FD out of agriculture globally. Trade openness and access to land resources have not been found to determine FD. Consequently, agricultural economy managers should work towards increasing the size of the agricultural economy; they should also liaise with their respective country’s Central Banks with a view to ensure exchange rate stability, and with their governments in order to promote better political regime characteristics and smoother political transitions.