International Peacekeeping Encourages Foreign Direct Investment: Subnational Evidence From Liberia’s Extractive Sector

Abstract

Attracting foreign direct investment (FDI) to post-conflict countries is difficult. After conflict ends, governments struggle to perfectly enforce the institutions which otherwise shield investors from political instability. Reflecting this governance problem, this article presents a new explanation linking United Nations (UN) peacekeeping operations to subnational allocations of FDI in post-conflict countries. I specifically argue that deployments of UN peacekeeping police credibly signal to foreign firms where future political instability is least likely to disrupt their operations. Data from Liberia’s extractive sector support my argument. Increasing the local deployment of UN police encourages foreign firms to establish new natural resource concessions, particularly in areas where the government’s capacity to uphold the rule of law is weak.