Determinants of foreign direct investment in Thailand: Does natural disaster matter?

Thailand has experienced unprecedented increase in foreign direct investment (FDI) over the past few decades, while there has been an increasing trend of natural disaster occurrence. Yet, the effect of natural disaster on FDI is unclear. The inconclusive findings can be reconciled by exploring the effect of natural disaster on FDI by applying the simultaneous equation approach to account for endogeneity between variables. Our results show that natural disaster does matter for FDI flows. Higher severity of natural disaster, captured by our constructed composite index, tends to lower FDI flows into Thailand, other things being equal.