Does Foreign Investment Really Reduce Repression?

Cross-national empirical studies have found that foreign investment has beneficial effects on human rights. We argue that these studies poorly operationalize foreign investment to test theoretical predictions and suffer from sampling bias. We demonstrate that investment stock, rather than inflow, is the superior operationalization of structural dependence theory. We construct regression models of government repression of physical integrity rights, include much more data than previous studies, and use a new multiple imputation algorithm for time-series cross-section data to resolve sampling bias. We find no evidence that foreign investment affects repression, contradicting conventional wisdom and suggesting that the political gains from repression frequently dwarf any economic costs for governments.