Labor protection and investment regulation: Promoting a virtuous circle

The policy goals of promoting foreign direct investment (FDI) and improving labor conditions of workers are often characterized as exclusionary. This short essay surveys the empirical literature and discusses the potential for positive synergies between FDI and labor. Research shows that the two are not at odds; on the contrary, they can buttress each other. A virtuous circle needs to be drawn between the two, but not because doing so may have a positive impact on economic variables such as production, revenue, economic development, or trade measurements. Rather, and more simply, it should be drawn because the only defensible relationship between FDI and labor is one in which the living conditions of workpeople improve. Albeit often neglected, the core of any set of economic considerations is its human dimension: labor.