Abstract

The world's population has witnessed the concurrence of two powerful global trends: an unprecedented growth in foreign direct investment (FDI) and an increase in natural disasters. Since investment decisions are based on an evaluation of expected risks and returns, we consider whether FDI decisions are influenced by natural disasters. We do so by considering the relation between FDI in 94 countries between 1984 and 2004 and the number of disasters striking those countries. Across a variety of empirical tests that control for two-way fixed effects we find natural disasters to be negatively and statistically significantly associated with a country's FDI.

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Additional Information

ISSN
1543-8325
Print ISSN
0023-7639
Pages
pp. 346-363
Launched on MUSE
2012-04-04
Open Access
No
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