Description
There´s been a long and contentious debate about the desirability of foreign direct investment (FDI) from transnational corporations (TNCs) for the economic and socio-political development of host countries. One important area of impact is if and how FDI effects conflict in host countries. There are theoretical reasons to think that FDI may pacify host-country conflict by bringing employment or strengthening state finances and capacity but also arguments that FDI may enhance the prospects for conflict via a “honey pot” effect. Empirically the issue remains unresolved. This study re-examines the question by utilizing local, geo-referenced data on both conflict and FDI. This data allows us to employ a spatial-temporal, difference-in-difference, approach which allows us to mitigate some of the endogenous selection effects of both conflict and FDI. Using this approach to look at a grid of nearly 5 million sites in Arica, we find strong evidence that the arrival of local FDI exacerbates local conflict.
