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Other publications Documents de travail du Centre d'Économie de la Sorbonne Year : 2022

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

Robert Reinhardt
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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.
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Dates and versions

halshs-03908250, version 1 (20-12-2022)
halshs-03908250, version 2 (03-10-2023)

Licence

Attribution - CC BY 4.0

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  • HAL Id : halshs-03908250 , version 2

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Robert Reinhardt. Shaking up Foreign Finance: FDI in a Post-Disaster World. 2022. ⟨halshs-03908250v2⟩
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Last update date on 5/19/24
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