The Price of Rights: Understanding the Economic Consequences of Improving Human Rights

Abstract

This study empirically investigates the effect that improving human rights has on economic growth and on economic development. The research departs from a debate about whether enforcing and improving human rights is simply a cost to states or whether it may bring economic benefits. One group of scholars argue that state interference in human rights goes against the liberal market economy, as it creates inefficiencies and decreases productivity. Meanwhile, another group of scholars argue that enforcing human rights will bring economic gains, as it will increase trade, investment and productivity. The study investigates these opposing claims. To do so, a mixed methods approach is used, combining a quantitative large number analysis with qualitative case study analyses. The quantitative analysis compares the effect of four groups of human rights on economic growth and on economic development. These four groups are basic human rights, civil rights, economic rights and social rights. Economic development is included because little existing research has considered the effect of human rights on development in broader economic terms. From the quantitative analysis it is found that there is a positive effect of economic rights on economic growth. An effect of basic human rights on economic development is also found, though this effect is less significant. The paper then continues with a qualitative analysis, aiming at providing a better understanding of the structures and mechanisms taking place in the relationship between human rights and economic growth or development. This findings should help explain why a positive relationship between human rights and economic growth or development is not necessarily observed in all countries of the world. Furthermore, the qualitative analysis is used to investigate the intermediaries through which scholars have argued that human rights affect economic growth and economic development. More specifically, the intermediaries considered are improvements to trade and investments. This analysis shows that trade may very well be an important intermediary between human rights and economic growth and development. No such connection is found to investments. Finally, the qualitative analysis investigates other country-characteristics that can help contribute to increased levels of human rights, economic growth and economic development. Here, the a generally high level of human rights, low levels of conflict, political stability and low inequality was found to be important mechanisms for generating high levels of human rights, economic growth and economic development. Therefore, policymakers who want to take advantage of the win-win situation that improving human rights seems to be may do so through a commitment to shared growth, low inequality, and by working towards settling possible conflicts in the country.