Taking Stock of Flow: Revisiting the Link Between FDI and Human Rights

• In Event: 3255 - Human Rights

Abstract

Existing research suggests a positive link between foreign direct investment (FDI) and human rights. In this study, we revisit this relationship and find that FDI does not produce significant improvements in human rights conditions. Both flow and stock measures of FDI are negatively associated with human rights ratings, with the negative effect of stock being notably larger. We discuss complications associated with the use of flow measures in panel estimation and argue that stock measures represent what scholars more likely have in mind when estimating the longitudinal effect of foreign capital. We then show that stock’s negative effect is robust to several methodological concerns, including denominator effects in the foreign investment rate, information effects in the dependent variable, endogeneity in the FDI-human rights relationship, and the removal of wealthy countries and influential observations from our models. Finally, stock’s negative effect does not significantly decline over time, but it is significantly reduced among democratic regimes. Overall, the results suggest that foreign capital does not improve human rights conditions, and it may prove detrimental, especially among authoritarian states.

Authors

• Rob Clark, University of Oklahoma

• Roy Kwon, University of La Verne