Estimating the dynamic and nonlinear peace dividends for foreign investment tourism and sustainable development using a global panel

This study examines whether improvements in peacefulness generate measurable economic and sustainability dividends and identifies the institutional and fiscal conditions under which those dividends are strengthened or weakened. Using an annual country panel for 2008–2024 with maximum coverage of 163 economies, subject to variable availability, peacefulness is measured as the inverted and standardised Global Peace Index. The empirical model combines two-way fixed effects, instrumental-variable two-stage least squares, dynamic system GMM, panel threshold and smooth-transition regressions, and local projections, thereby addressing unobserved heterogeneity, reverse causality, persistence, nonlinear moderation, and dynamic adjustment within a common framework. A one-standard-deviation improvement in peacefulness is associated with higher FDI inflows, larger tourism receipts, and better SDG and environmental performance; the endogeneity-robust estimates preserve the positive sign while yielding more conservative magnitudes. The dynamic results show that tourism responds relatively quickly and FDI effects persist for several years. Most importantly, the estimated peace dividend weakens sharply when military expenditure exceeds approximately 3.5% of GDP, indicating that peace gains are conditional on the fiscal burden of militarisation and on institutional absorptive capacity. The findings suggest that governments should combine peace consolidation with rule-of-law and regulatory reforms, rapid investment aftercare, credible destination-safety communication, and transparent reallocation of fiscal space toward SDG-aligned infrastructure, education, health, climate adaptation, and environmental management. International organisations can reinforce these gains by linking peacebuilding assistance to monitored public-expenditure and project-delivery benchmarks. The study therefore models the peace dividend as a dynamic and nonlinear country-level process in which peacefulness affects investment, tourism, and sustainability through institutional credibility, risk perceptions, and resource allocation.