Monday, October 5th
Gyu Sang Shim (Rochester), “The Location of Extractive FDI and Armed Conflicts”
Foreign direct investments (FDI) in mining industries play a key role in the development strategies of many countries. Yet, mines are vulnerable to insurgent attacks, and it has been argued that these investments may promote civil conflict. Using geo-referenced data of armed conflicts between 1998 and 2010 near 6,222 mining facilities, this paper investigates the probability of extractive FDI affected by armed conflict. This paper claims that foreign ownership has a prevention effect on armed conflicts in regions where mining facilities are located. Armed groups increase the risk of international military intervention after seizing foreign-owned facilities. This expectation of foreign intervention in conflicts discourages both insurgents and national governments in fighting near regions where foreign-owned mines are located. Using a difference-in-differences design with kernel-based propensity score matching, this paper shows that the fear of military intervention outweighs incentives of attacking foreign-owned mines. In addition, the prevention effect of foreign ownership is strengthened by the military capability of foreign miners’ home country.