Do Bilateral Investment Treaties Deliver the Goods? Evidence from Developing Countries
AbstractBilateral investment treaties (BITs), signed by developing countries explicitly state the objective of promoting foreign direct investment (FDI). The rapid increase in the number of BITs and the concurrent increase in worldwide flows of FDI between 1980 and 2003 suggest that BITs are an effective strategy toward this goal. Recent studies provide some empirical support for this link. However, FDI flows into specific countries from 1980 to 2003 reveals the puzzling behavior for flows to increase soon after country starts signing BITs, followed by fluctuations with either a downward trend or no noticeable trend at all. Our main contribution is to explain this behavior by explicitly incorporating the impact of treaty violations, as evidenced by treaty disputes arbitrated by the International Centre for Settlement of Investment Disputes, on FDI flows. We find that while BITs are effective in attracting investment, disputes tend to decrease future investment flows.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Review of Applied Economics in its journal Review of Applied Economics.
Volume (Year): 07 (2011)
Issue (Month): 1-2 ()
Contact details of provider:
Web page: http://www.lincoln.ac.nz/story11874.html
FDI; Bilateral Investment Treaty; domestic content; International Development; International Relations/Trade; F21; F53; O24; O16;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
- Bubb, Ryan J. & Rose-Ackerman, Susan, 2007. "BITs and bargains: Strategic aspects of bilateral and multilateral regulation of foreign investment," International Review of Law and Economics, Elsevier, vol. 27(3), pages 291-311, September.
- Neumayer, Eric & Spess, Laura, 2005.
"Do bilateral investment treaties increase foreign direct investment to developing countries?,"
Elsevier, vol. 33(10), pages 1567-1585, October.
- Eric Neumayer & Laura Spess, 2004. "Do bilateral investment treaties increase foreign direct investment to developing countries?," International Finance 0411004, EconWPA, revised 10 May 2005.
- Assaf Razin & Efraim Sadka & Hui Tong, 2008.
"Bilateral FDI Flows: Threshold Barriers and Productivity Shocks,"
CESifo Economic Studies,
CESifo, vol. 54(3), pages 451-470, September.
- Assaf Razin & Efraim Sadka & Hui Tong, 2005. "Bilateral FDI Flows: Threshold Barriers and Productivity Shocks," NBER Working Papers 11639, National Bureau of Economic Research, Inc.
- Grossman, Gene M, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 583-603, November.
- Anil Kumar, 2007. "Does foreign direct investment help emerging economies?," Economic Letter, Federal Reserve Bank of Dallas, vol. 2(jan).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.