The Impact of Armed Conflict on Inward Foreign Direct Investment (FDI): An Analysis of Conflict Over Government, Conflict Over Territory, and FDI

Miao Grace Wang, M.C. Sunny Wong, Hong Zhuang and Reinhard Cate

Global Economic Review, 2024, vol. 53, issue 1, 25-51

Abstract: We examine the relationship between armed conflict and foreign direct investment (FDI) in host countries. With data from 113 nations from 1984 to 2014, system GMM and macro-panel CCEMG estimators show that intrastate armed conflict decreases FDI in conflict-ridden hosts. Further, we distinguish two types of armed conflict – conflict over government and conflict over territory. Conflict over government has significant short-term and long-term negative impacts on FDI, while the effect of territorial conflicts appears insignificant. Our results also suggest that armed conflict's harmful impact on FDI mainly occurs in middle- and low-income host countries.

Date: 2024
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DOI: 10.1080/1226508X.2024.2305468

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