Do Additional Bilateral Investment Treaties Boost Foreign Direct Investments?
AbstractThis paper finds that the stock of bilateral investment treaties (BIT) is subject to diminishing returns measured in terms of foreign direct investment flows. Diminishing returns are more pronounced among country-pairs that have not signed bilateral investment treaties but have their own BIT network than among country-pairs with their own bilateral investment treaties. For a given country's BIT network, a multinational enterprise finds more value in investing where a bilateral treaty is in place. This may suggest either stronger property-rights protection or greater latitude to use the host country as an export platform. Our subsidiary finding is that an index of a country's BIT network diversity appears to be a plausible explanation of the limiting force underlying the diminishing returns of the stock of BITs in a world where there is a mix between horizontally and vertically integrated multinational enterprises.
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Date of creation: Oct 2010
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bilateral investment treaty; foreign direct investment; gravity equation; network diversity;
Other versions of this item:
- Chang Hoon Oh & Michele Fratianni, 2010. "Do Additional Bilateral Investment Treaties Boost Foreign Direct Investments?," Working Papers 2010-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-13 (All new papers)
- NEP-IFN-2010-11-13 (International Finance)
- NEP-INT-2010-11-13 (International Trade)
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