Attracting Investment: Governments' Strategic Role in Labor Rights Protection

Autumn Lockwood Payton, Byungwon Woo

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

What is the relationship between respect for labor rights and foreign direct investment (FDI)? This study explores this connection with an emphasis on the strategic role of governments in attracting FDI. We present a formal model demonstrating that governments can do so by setting the level of labor rights protection and, as a consequence, investors will choose to invest in the face of tough labor regulations or cease investing, anticipating that the costs of abiding by these regulations will be too high. The model also suggests that governments will have an incentive to implement labor regulations when enforcement costs are sufficiently low or the profits from investment are sufficiently high. Using data from developing countries across time, error correction models test the dynamic nature of these hypotheses and find support for them: strict labor laws tend to decrease inflow of FDI, but more FDI tends to encourage better labor practices.

Original languageEnglish
Pages (from-to)462-474
Number of pages13
JournalInternational Studies Quarterly
Volume58
Issue number3
DOIs
Publication statusPublished - 2014 Sep 1

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direct investment
foreign investment
labor
regulation
labor law
costs
investor
respect
profit
incentive
developing country

All Science Journal Classification (ASJC) codes

  • Sociology and Political Science
  • Political Science and International Relations

Cite this

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Attracting Investment : Governments' Strategic Role in Labor Rights Protection. / Payton, Autumn Lockwood; Woo, Byungwon.

In: International Studies Quarterly, Vol. 58, No. 3, 01.09.2014, p. 462-474.

Research output: Contribution to journalArticle

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