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 Paris1 Panthéon-Sorbonne, https://centredeconomiesorbonne.cnrs.fr

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

Abstract: This paper studies the effects earthquakes have on inward foreign direct investment (FDI) within a country. I use a dynamic difference-in-difference model to estimate the impact of geophysical disaster exposure in 416 Indonesian districts. The effects are only temporary: FDI inflows plummet by 90% on average in the first year an earthquake before recovering to pre-earthquake levels. The effect is largely driven by shocks through affected upstream industries within local supply chains, and centered within the manufacturing sector. This highlights the importance to also consider indirect earthquake effects through spatial and production networks, besides the direct effects on labor and capital

Keywords: Foreign Direct Investment; Disasters; Risk; Input-Output (search for similar items in EconPapers)
JEL-codes: C67 F21 O12 Q54 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2022-12, Revised 2023-09
New Economics Papers: this item is included in nep-ger, nep-int and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:22024r

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