Rights as Signals

Abstract:     
Besides its direct moral benefits, human rights protection may also serve an indirect economic function by conveying a signal about the government in question. Because rights operate as trumps over normal governmental decisions, they have an inherent cost. Because protection of human rights is costly to governments, a government's embrace of constitutionalism provides a broader message about its commitments. In particular, by entrenching protection for human rights, governments can communicate that they are willing to give up power in the short-term to obtain long-term benefits. Investors can infer from this that the government has a low discount rate and is less likely to pose a threat of expropriation. Similarly, when courts vigorously enforce human rights against their governments, they dramatize in the strongest possible way their judicial independence. An independent judiciary is valuable to investors who themselves have no interest in human rights whatsoever. Thus, as a beneficial side-effect, human rights enforcement might help encourage investment and thereby indirectly foster economic growth.

Number of Pages in PDF File: 42

working papers series