The effect of natural disasters on FDI attraction: a sector-based analysis over time and space

Thomas Neise (), Franziska Sohns (), Moritz Breul () and Javier Revilla Diez
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Thomas Neise: Osnabrück University
Franziska Sohns: University of Greenwich
Moritz Breul: University of Cologne

Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, 2022, vol. 110, issue 2, No 7, 999-1023

Abstract: Abstract Extensive research has addressed the question of why some countries are able to attract a large amount of foreign direct investment (FDI), while others are not. Until now, this research mostly neglected natural disasters as a business risk. In the realm of natural disaster research, some studies have investigated the effect of natural disasters on FDI inflow. However, this research remains overly simplistic and conceals the complexities of the underlying relationship. As such, this article aims to provide a more deciphered perspective by considering variations across economic sectors and the dynamic effect of natural disasters. We apply hybrid panel regressions to a dataset of 181 countries over a period of 13 years across four different economic sectors. The analysis shows that the effect of natural disasters on FDI inflow varies among economic sectors. From a longitudinal perspective, the study finds a positive relationship between exposure to natural disasters and the inflow of FDI within countries 3 and 5 years after an event. Overall, the findings highlight the complex nature of the relationship between natural disasters and FDI and warn against using too simplistic approaches.

Keywords: Foreign direct investment; Multinational enterprises; Risk; Hybrid panel regression; Sector-specific analysis (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11069-021-04976-3

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