Failed Coup Attempts and Fading FDI in the Extractive Sector

Abstract

How do failed coup attempts impact foreign direct investment (FDI) inflows? A number of studies have examined the effects of political institutions and violent events on FDI inflows. However, the specific impact of failed coup attempts on sectoral FDI inflows has remained unexplored. In this paper, we argue that failed coup attempts lead to a decline in FDI inflows, particularly in the primary sector. Faced with failed coup attempts, leaders are compelled to devise various coup-proofing strategies, such as enhancing repressive capabilities and buying off military elites to counter potential future coups. To finance these strategies, leaders may prioritize deriving revenues from the primary sector, given its relatively straightforward revenue extraction processes. Drawing on sectoral FDI volume data from 1980 to 2008, we find a decline in FDI inflows within the primary sector in the years following failed coup attempts. This trend is not observed in other sectors, such as the secondary and tertiary sectors.

Do Young Gong

Ph.D. Student

My research interests include international relations, armed conflicts, the interdependence between political violence, and leader survival.