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

Robert Reinhardt
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Robert Reinhardt: Centre d'Economie de la Sorbonne - Université Paris 1 Pantheon-Sorbonne

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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

Keywords: Foreign Direct Investment; Disasters; Risk; Economic Growth; Input-Output (search for similar items in EconPapers)
JEL-codes: C67 F21 O12 Q54 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2022-12
New Economics Papers: this item is included in nep-int and nep-sea
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Published in Economics of Disasters and Climate Change, 2024, 8, pp.317–348

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https://shs.hal.science/halshs-03908250 (application/pdf)
https://doi.org/10.1007/s41885-024-00151-7

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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:22024

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