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Shaking up Foreign Finance: FDI in a Post-Disaster World

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Abstract

This study investigates which effect earthquakes have on the inflow of foreign direct investment (FDI) within a country from a temporal, spatial and sectoral dimension. It uses a dynamic difference-indifference model of physical disaster exposure in 416 Indonesian districts between 2003 and 2019 in order to quantify the impact on investment behavior from abroad. Drawing geolocated data from a variety of sources, the results indicate that FDI inflows are temporarily reduced of around 90% in the year after the disaster. In this case study, spatial effects play a subordinate role, yet earthquake shocks affecting upstream industries tend to have substantial negative effects. Manufacturing appears to be the most affected sector

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  • Robert Reinhardt, 2022. "Shaking up Foreign Finance: FDI in a Post-Disaster World," Documents de travail du Centre d'Economie de la Sorbonne 22024, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:22024
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    More about this item

    Keywords

    Foreign Direct Investment; Disasters; Risk; Economic Growth; Input-Output;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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