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Labor Rights and Foreign Direct Investment: Is There a Race to the Bottom?

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  • Robert G. Blanton
  • Shannon L. Blanton

Abstract

As global awareness of human rights continues to increase, the practices and investment decisions of multinational corporations have come under increased scrutiny. This is particularly the case with labor rights. Popular arguments concerning a “race to the bottom” abound, though a growing amount of scholarship portrays a more positive relationship between foreign capital and such rights. Yet empirical studies have yielded mixed results. To clarify the linkages between labor rights and foreign direct investment (FDI), we add to the extant literature in two ways. First, we take into account the reciprocal relationship between FDI and labor rights. Second, as FDI is a heterogeneous phenomenon, we assess these linkages across three different industrial sectors. Our findings show that there is a significant relationship between labor rights and FDI, though its exact nature varies across sectors.

Suggested Citation

  • Robert G. Blanton & Shannon L. Blanton, 2012. "Labor Rights and Foreign Direct Investment: Is There a Race to the Bottom?," International Interactions, Taylor & Francis Journals, vol. 38(3), pages 267-294, July.
    • Handle: RePEc:taf:ginixx:v:38:y:2012:i:3:p:267-294
    DOI: 10.1080/03050629.2012.676496
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    References listed on IDEAS

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    1. Cohen, Stephen D., 2007. "Multinational Corporations and Foreign Direct Investment: Avoiding Simplicity, Embracing Complexity," OUP Catalogue, Oxford University Press, number 9780195179361.
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    Citations

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    Cited by:

    1. Yang, Yujeong, 2022. "Bring Your Own Workers: Chinese OFDI, Chinese overseas workers, and collective labor rights in Africa," World Development, Elsevier, vol. 152(C).
    2. Guasti, Alessandro & Koenig-Archibugi, Mathias, 2022. "Has global trade competition really led to a race to the bottom in labor standards?," LSE Research Online Documents on Economics 113752, London School of Economics and Political Science, LSE Library.
    3. Dionne Pohler & Chris Riddell, 2019. "Multinationals’ Compliance with Employment Law: An Empirical Assessment Using Administrative Data from Ontario, 2004 to 2015," ILR Review, Cornell University, ILR School, vol. 72(3), pages 606-635, May.
    4. Jirjahn, Uwe, 2024. "Corporate Globalization and Worker Representation," GLO Discussion Paper Series 1369, Global Labor Organization (GLO).
    5. Fangjin Ye, 2020. "The impact of bilateral investment treaties (BITs) on collective labor rights in developing countries," The Review of International Organizations, Springer, vol. 15(4), pages 899-921, October.
    6. Blanton, Robert G. & Blanton, Shannon Lindsey & Peksen, Dursun, 2015. "Financial Crises and Labor: Does Tight Money Loosen Labor Rights?," World Development, Elsevier, vol. 76(C), pages 1-12.
    7. Maja Nikšić Radić & Daniel Dragičević & Marina Barkiđija Sotošek, 2019. "Causality between Terrorism and FDI in Tourism: Evidence from Panel Data," Economies, MDPI, vol. 7(2), pages 1-19, May.
    8. Dursun Peksen & Robert G. Blanton, 2017. "The impact of ILO conventions on worker rights: Are empty promises worse than no promises?," The Review of International Organizations, Springer, vol. 12(1), pages 75-94, March.
    9. Messerschmidt, Luca & Janz, Nicole, 2023. "Unravelling the ‘race to the bottom’ argument: Foreign direct investment and different types of labour rights," World Development, Elsevier, vol. 161(C).
    10. Luca Messerschmidt & Nicole Janz, 2020. "Unravelling the 'race to the bottom' argument: How does FDI affect different types of labour rights?," Munich Papers in Political Economy 05, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    11. Rutar, Tibor, 2025. "Do large, sustained economic freedom reforms hurt or improve women's economic rights?," European Journal of Political Economy, Elsevier, vol. 87(C).
    12. Ali, Wajid & Dash, Devi Prasad & Jangam, Bhushan Praveen & Singh, Amit & Rana, Nripendra P., 2026. "Transmission of democracy to a better business environment: roles of regulation and institutions," Journal of Business Research, Elsevier, vol. 207(C).
    13. Hye‐Sung Kim & Jeheung Ryu, 2023. "Predicting FDI inflows: Exploring a nonlinear relationship between peace years, oil wealth, and the rule of law," Review of Development Economics, Wiley Blackwell, vol. 27(4), pages 2104-2122, November.
    14. Robert G. Blanton & Shannon Lindsey Blanton, 2015. "Is Foreign Direct Investment "Gender Blind"? Women's Rights as a Determinant of US FDI," Feminist Economics, Taylor & Francis Journals, vol. 21(4), pages 61-88, October.

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