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Rights, Institutions and FDI: An Empirical Assessment

Robert G. Blanton Shannon Lindsey Blanton University of Memphis. Rights, Institutions and FDI: An Empirical Assessment. Goal/Contribution. Examine role of rights and institutions in influencing FDI Human Rights – personal integrity, labor rights, education

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Rights, Institutions and FDI: An Empirical Assessment

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  1. Robert G. Blanton Shannon Lindsey Blanton University of Memphis Rights, Institutions and FDI: An Empirical Assessment

  2. Goal/Contribution • Examine role of rights and institutions in influencing FDI • Human Rights – personal integrity, labor rights, education • Institutions – BITs, FTAs, WTO, democratic governance • Variance across industrial sectors

  3. Political Influences on FDI • Rights • “spotlight” effect • more productive society • Institutions • reduce “dynamic inconsistency” problems • visible commitment to liberal policies

  4. Variation across sectors? Two key factors: • Skill level – linked with greater concern with rights • Dynamic Inconsistency Risks – greater need for institutional guarantees • Sunk costs • Mobility of capital

  5. Data and Research considerations • FDI data • BEA • FDI stock for 11 sectors, 1982-2007 • Leading hosts of U.S. FDI • 3 rights measures, 4 institutions measures • Rights – CIRI physical integrity and labor rights, human capital • Institutions – Polity, BITs, PTAs, WTO

  6. Specific Sectors

  7. Regression strategy • Pool observations • Unit of analysis – sector/country-year • Dummy variable + interaction terms for key independent variables • Base model (all sectors) • Model 1 – skill level dummy and interaction terms for rights and institutions variables • Model 2 – same for D.I. • Population-averaged model

  8. Findings (Key Variables)

  9. Findings – Interaction Terms

  10. Conclusions • Rights have a somewhat stronger impact than institutions • Impact of skill – rights still matter at lower skill levels contra “labor dumping” • Dynamic inconsistency • Rights – more mobile capital responsive to rights • Institutions – Democracy, WTO

  11. Implications/Further research • Democracy? • Need to further assess sociopolitical determinants • Need to account for diversity of FDI in analyses

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