Undergraduate Honors Theses

Thesis Defended

Spring 2016

Document Type

Thesis

Type of Thesis

Departmental Honors

Department

Economics

First Advisor

Keith Maskus

Second Advisor

Nicholas Flores

Third Advisor

Andy Baker

Abstract

This research examines the effect of conflict and inequality on foreign direct investment (FDI). International policy designed to promote wellbeing and post conflict reconstruction is often focused on attracting FDI. I analyze 44 years of panel data for several specifications of conflict and FDI. I employ a fixed effect ordinary least squared model with clustered standard errors to test for the influence of conflict on FDI. My results indicate that conflict significantly and robustly reduces FDI. These results remain robust and significant when controlling for common determinants of FDI. Inequality, normally not a determinant of FDI, has a significant interaction with conflict. Conflict associated with decreased inequality further decreases FDI.

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