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The economic benefits of justice: Post-conflict justice and foreign direct investment

Benjamin J Appel and Cyanne E Loyle
Journal of Peace Research
Vol. 49, No. 5 (September 2012), pp. 685-699
Published by: Sage Publications, Ltd.
Stable URL: http://www.jstor.org/stable/41721633
Page Count: 15
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Abstract

Post-conflict states represent an important research agenda for scholars studying foreign direct investment (FDI). While leaders of post-conflict states have strong incentives for trying to attract international investments, multinational corporations (MNCs) may view these states as high-risk since the reoccurrence of violence in the aftermath of civil conflict is common. Consequently, leaders of post-conflict states desperate to receive FDI to help ignite their stalled economies must convince MNCs that their state is a stable and secure place to invest in. Drawing on the recent literature that identifies the importance of domestic and international institutions for securing FDI, this article argues that post-conflict justice (PCJ) institutions can help post-conflict states attract investment. The domestic and reputation costs associated with implementing PCJ allow states to send a costly and credible signal to international investors about the state's willingness to pursue the successful reconstruction of the post-conflict zone. Under these conditions, uncertainty is lessened and foreign investors can feel more confident about making investments. Postconflict states, therefore, that choose to implement PCJ are more likely to receive higher levels of FDI compared with post-conflict states that refrain from implementing these institutions. Statistical tests confirm the relationship between justice institutions and FDI from 1970-2001. Post-conflict states that implement restorative justice processes in the post-conflict period receive higher levels of FDI than those countries that do not implement a process.

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