Research Summary: Natural Disasters and Foreign Direct Investment
Research Summary
Natural Disasters and Foreign Direct Investment
M onica Escaleras and Charles A. Register
The aim of this paper is to address the linkage between foreign direct investment (FDI) flows and the number of natural disasters. By using the data of 94 countries in the period of
1984 to 2004 and applying a variety of empirical tests, the result appears that natural hazards have significantly negative effects on FDI of countries.
A. Economic Effects of Natural Disasters and The Determinants of Foreign Direct
Investment
Economic Effects of Natural Disasters
There are three patterns that concern with the economic effects of natural hazard. The first two strands concentrates on the primary or short-term effects and long-term effects of hazards on economy. While the short-term effect strand achieves abundant evidences of negative disasters’ impacts on GDP, the long-term effect strand cannot reach a clear conclusion. The third strand focuses on the capacity to mitigate the destructive effects of natural risks. A brief conclusion is that the negative impacts of risks can be diminished by country’s institutions.
Determinant of Foreign Direct Investment
There are three types of foreign direct investment, namely:
(1) Operating new
(2) Moving an existing
(3) Moving a part of existing
The first type is considered as location decision and categorized in pull factor, the latter two types are relocation decision and belong to push factor. Following this logic, propositional pull factors to put in models are the level of openness and the size of the economy. Obviously, the push factor in models is natural risks.
Other determinants which are mainly focused are institutions, such as government infrastructure, political freedom, corruption, etc.
B. Data and Methods
The data for analyzing impacts of natural disasters on FDI flows are taken from the EMDAT, which provides by the institution Center for Research on the Epidemiology
Natural Disasters and Foreign Direct Investment
M onica Escaleras and Charles A. Register
The aim of this paper is to address the linkage between foreign direct investment (FDI) flows and the number of natural disasters. By using the data of 94 countries in the period of
1984 to 2004 and applying a variety of empirical tests, the result appears that natural hazards have significantly negative effects on FDI of countries.
A. Economic Effects of Natural Disasters and The Determinants of Foreign Direct
Investment
Economic Effects of Natural Disasters
There are three patterns that concern with the economic effects of natural hazard. The first two strands concentrates on the primary or short-term effects and long-term effects of hazards on economy. While the short-term effect strand achieves abundant evidences of negative disasters’ impacts on GDP, the long-term effect strand cannot reach a clear conclusion. The third strand focuses on the capacity to mitigate the destructive effects of natural risks. A brief conclusion is that the negative impacts of risks can be diminished by country’s institutions.
Determinant of Foreign Direct Investment
There are three types of foreign direct investment, namely:
(1) Operating new
(2) Moving an existing
(3) Moving a part of existing
The first type is considered as location decision and categorized in pull factor, the latter two types are relocation decision and belong to push factor. Following this logic, propositional pull factors to put in models are the level of openness and the size of the economy. Obviously, the push factor in models is natural risks.
Other determinants which are mainly focused are institutions, such as government infrastructure, political freedom, corruption, etc.
B. Data and Methods
The data for analyzing impacts of natural disasters on FDI flows are taken from the EMDAT, which provides by the institution Center for Research on the Epidemiology