Regime Type, Rights, and Foreign Direct Investment in Latin America: A Brief Comment

Abstract

Biglaiser and DeRouen (2006)1 have provided a thorough examination of the effects of different types of economic reforms on flows of foreign direct investment (FDI). Their main finding-that economic reforms were generally unsuccessful in generating inflows of FDI during the time series-will undoubtedly generate further discussion about neoliberalism in Latin America. Although the authors' focus is on economic reform, they also devote considerable attention to the significance of good governance variables, including the effects of political regime type. Biglaiser and DeRouen's (2006) paper adds to a growing number of studies that have produced conflicting findings regarding the effects of regime type and/or rights and liberties on FDI.2 Given the conflicting results in the literature, and the policy significance of the issue, a brief commentary on the question of regime type, rights, and FDI in Latin America (and in other developing areas) is warranted. One problem in the literature is that researchers frequently employ measures of regime type that may not adequately capture crosssectional differences in rights and civil liberties in Latin America. Similar to previous studies, Biglaiser and DeRouen (2006) use the Polity IV data set (Marshall and Jaggers 2002) as a measure of authoritarianism and democracy in recipient countries. The Polity data focus primarily on constraints faced by the executive, the degree of competition and openness in executive recruitment, and political competition in a