Chapter 31 - Do Natural Disasters Reduce Foreign Direct Investment in Sub-Saharan Africa?

Abstract

This study investigates the extent to which within- and between-country variations in the frequency of natural disasters affect the net inflows of foreign direct investment (FDI) in Sub-Saharan Africa (SSA). An empirical model is developed in which prior occurrences of natural disasters affect the subsequent FDI. Changes in the frequency of natural disasters are considered for three different periods: (1) the year before the measurement of FDI; (2) the 2 years before the measurement of FDI; and (3) the 3 years before the measurement of FDI. The study uses hybrid models for a panel of 44 SSA countries in the period from 1970 to 2018. The results suggest that the changes in the frequency of natural disasters have little causal impact on the FDI inflows in SSA. With this finding, the chapter highlights a few key areas that need serious consideration for further research on natural disasters and FDI in SSA.