Foreign Investment and Shifts in Party Alignment: Evidence from Latin America

• In Event: Political Implications of Foreign Direct Investment: Promising Trends & Methods

Abstract

This paper examines how the location and characteristics of foreign direct investment affect partisan alignment in Latin America. I demonstrate that foreign investment can, depending on the type of investment and the conditions under which it is made, substantially shift partisan alignment, with higher levels of investment in secondary and tertiary investment increasing support for conservative parties but investment in the primary sector increasing support for leftist parties. My theory relies on the assumption that higher incomes and economic growth from foreign investment should shift partisan attitudes towards more conservative parties, but that the negative environmental and labor spillovers of investment in the primary sector should have the opposite effect. Using a matching procedure on Latin American survey data and greenfield investment I find substantial evidence in support of my theory. The findings are bolstered by an additional analysis of municipal-level voting data in Brazil, demonstrating that the effects apply not only to political attitudes but also to real-world political behavior. The results help elucidate how international economic factors shape both individual-level political preferences and real-world elections, adding to the growing literature on the political ramifications of foreign investment for host country governments.

Author

• Alexander Slaski, Leiden University