Description
Populist governments are generally expected to reduce foreign direct investment (FDI), yet existing research fails to explain why some sectors are more affected than others. This limitation reflects the assumption in current scholarship that the effects of populism are uniform across economic sectors. I argue that populism generates sector-specific political uncertainty and risk, producing larger declines in politically salient sectors that are more exposed to state intervention, such as agriculture, energy, and water and waste management. Globally integrated sectors such as finance, services, and manufacturing are more resilient because interventions in these sectors may generate immediate macroeconomic costs, threatening the economic performance on which populist governments and their winning coalitions depend. I test these expectations using country-year panel data from 2000 to 2023, fixed-effects models, and cross-national OECD sectoral data. Results indicate that populism is associated with lower aggregate FDI inflows and sectoral reallocation of investment. Sectoral heterogeneity depends on exposure to political intervention: highly exposed sectors lose investment, while globally integrated sectors are relatively insulated. Transnational capital responds asymmetrically to political uncertainty and risk, and exposure to state intervention may unintentionally redirect investment away from the very sectors populism claims to protect.