Global food shortages and rising fossil fuel prices in and around 2008 spurred investors to reconsider Africa as the continent with apparently the largest reserves of under-utilized agricultural land. International capital sought large land concessions at low rents in areas with low population densities and poor infrastructure, aiming to transform the productivity of these impoverished and under-utilized areas through large-scale industrial methods of crop production.
The approach has been controversial. Opponents refer to a 'land grab', asserting that these acquisitions must necessarily damage the livelihood opportunities of the rural poor. What are the impacts of such investments? To date there has been little rigorous quantitative evidence on the issue.
We examine livelihood impacts of a large-scale biofuel plantation in Sierra Leone. We conduct a difference in difference analysis using three waves of a large n survey in both communities directly affected by the plantation and those outside the catchment area. We find increases in income for employees, but non-employees suffer from a substantial drop. This might be caused by a drop in land access, affecting agricultural income. This increases inequality. We find some evidence that health access improves across the board.
We hypothesise that the income effect is caused by a labour supply shock: less labour available for agricultural production in-village reduces agricultural production and thus income. This shows that to assess the impact of these investments it is necessary to examine the full village economy.