Do foreign direct investment and trade affect the relationship between temperature and civil conflict?

Chengchun Li, Sailesh Tanna, Glauco De Vita, Keyi Yang, Yun Luo and Yan Chen

Economic Modelling, 2025, vol. 152, issue C

Abstract: This study investigates the role of countries’ outward orientation in the relationship between temperature and civil conflict. We add to existing literature by highlighting the importance of FDI and trade openness as mitigating factors to reduce the risk of temperature-induced conflict. Using data from 62 developing countries covering the period 1990–2022, and incorporating several estimation methods and robustness tests, our results indicate that higher temperature increases conflict risk, while FDI inflows, particularly non-primary sector FDI, and trade openness, weaken the positive association by virtue of technical innovation and their capacity to stimulate sustainable practices and climate adaptation strategies. Hence, greater trade with developing countries, along with higher foreign investment into their secondary and tertiary sectors, alleviates their trade-off between extreme temperatures and civil conflict. This broader understanding of the macroeconomic factors moderating the temperature-conflict relationship offers another valuable perspective for inter-governmental climate policy-making efforts to reduce civil conflict.

Keywords: Temperature; Trade openness; Foreign direct investment; Economic sectors; Civil conflict (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:152:y:2025:i:c:s0264999325002883

DOI: 10.1016/j.econmod.2025.107293

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