What Attracts Foreign Investors? An Examination of Human Rights and Foreign Direct Investment

Though the prospective relationship between foreign direct investment (FDI) and human rights has long been a prominent issue within the global political economy, the linkage is empirically underdeveloped. Rather, the conventional wisdom that FDI and respect for human rights are inherently contradictory has persisted. Instead, we posit that respect for human rights may encourage FDI. To examine this issue, we assess the direct effects of human rights upon FDI as well as the extent to which human rights indirectly affects FDI through its impact upon human capital. Using a system of simultaneous equations, we find respect for human rights to have a positive impact upon FDI.