When countries commit to international human rights regimes, does this affect the amount of foreign direct investment (FDI) they receive? Although many studies examine why countries commit to human rights regimes, and whether these regimes affect human rights violations, we know less about the effect of human rights regimes on third party behavior.
In a recent article, drawing on data collected from 135 developing countries, between 1982 and 2011, I show that while foreign investors are often deterred by countries’ human rights violations, ratifying human rights treaties apparently mitigates this effect. Human rights regimes appear to provide a “reputational umbrella” for investment in countries with the worst human rights practices. As a result, human rights treaties can shield host countries from the normally FDI-deterring effect of their own human rights violations.
My research shows that the ratification of an additional human rights treaty is associated with more FDI, especially in countries with higher levels of human rights violations. In fact, the positive effect of an additional treaty on FDI is more than 250% larger for countries with the worst human rights records versus other countries. Violating more human rights is associated with less FDI, but only for countries that have committed to three or fewer human rights treaties. (This is not a rare event: half of the sample used in this study fits that condition.) Beyond that threshold, human rights violations do not seem to significantly affect FDI flows. Thus, human rights violations do deter investment, but only in countries that are not fully engaged in the network of international human rights conventions.
Does this mean that investors care more about international law than about human rights? Arguably, it’s about appearances: investors react to countries’ human rights violations because they worry about their own reputation. Mechanisms that potentially shield investors’ reputation from doing…