Advanced Search
MyIDEAS: Login to save this paper or follow this series

What Determines BITs?

Contents:

Author Info

  • Jeffrey H. Bergstrand
  • Peter Egger

Abstract

Bilateral investment treaties (BITs) have proliferated over the past 50 years such that the number of pairs of countries with BITs is roughly as large as the number of country-pairs that belong to bilateral or regional preferential trade agreements (PTAs). The purpose of this study is to provide the first systematic empirical analysis of the economic determinants of BITs and of the likelihood of BITs between pairs of countries using a qualitative choice model, and in a manner consistent with explaining PTAs. We develop the econometric specification for explaining the two based upon a general equilibrium model of world trade and foreign direct investment with three factors, two products, and explicit natural as well as policy trade and investment costs among multiple countries in the presence of national and multinational firms. The empirical model for BITs and PTAs is bivariate in nature and supports a set of hypotheses drawn from the general equilibrium model. Using the preferred empirical model, we correctly predict approximately 85 (75) percent of all BITs (PTAs) correctly, relative to an unconditional probability of only 11 (16) percent.

Download Info

If 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.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-07/cesifo1_wp3514_1.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3514.

as in new window
Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:ces:ceswps:_3514

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: bilateral investment treaties; foreign direct investment; multinational firms; free trade agreements; international trade;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. David L. Carr & James R. Markusen & Keith E. Maskus, 1998. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," NBER Working Papers 6773, National Bureau of Economic Research, Inc.
  2. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, Elsevier, vol. 14(3-4), pages 341-356, May.
  3. Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, Elsevier, vol. 82(2), pages 238-248, November.
  4. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2009. "Importers, Exporters and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 513-552 National Bureau of Economic Research, Inc.
  5. Richard Baldwin & Dany Jaimovich, 2009. "Are Free Trade Agreements Contagious?," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd09-057, Institute of Economic Research, Hitotsubashi University.
  6. Peter Egger & Michael Pfaffermayr, 2004. "Distance, trade and FDI: a Hausman-Taylor SUR approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(2), pages 227-246.
  7. J.P. Neary, 1995. "Factor Mobility and International Trade," CEP Discussion Papers dp0248, Centre for Economic Performance, LSE.
  8. Eric Neumayer & Laura Spess, 2004. "Do bilateral investment treaties increase foreign direct investment to developing countries?," International Finance, EconWPA 0411004, EconWPA, revised 10 May 2005.
  9. Helpman, Elhanan & Razin, Assaf, 1983. "Increasing returns, monopolistic competition, and factor movements : A welfare analysis," Journal of International Economics, Elsevier, Elsevier, vol. 14(3-4), pages 263-276, May.
  10. Freund, Caroline & Ornelas, Emanuel, 2010. "Regional trade agreements," Policy Research Working Paper Series 5314, The World Bank.
  11. Laura Alfaro & Andrew Charlton, 2009. "Intra-industry Foreign Direct Investment," American Economic Review, American Economic Association, American Economic Association, vol. 99(5), pages 2096-2119, December.
  12. Daniel McFadden, 1975. "The Revealed Preferences of a Government Bureaucracy: Theory," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 6(2), pages 401-416, Autumn.
  13. Moser, Christoph & Rose, Andrew K., 2014. "Who benefits from regional trade agreements? The view from the stock market," European Economic Review, Elsevier, Elsevier, vol. 68(C), pages 31-47.
  14. Aisbett, Emma, 2007. "Bilateral Investment Treaties and Foreign Direct Investment: Correlation versus Causation," MPRA Paper 2255, University Library of Munich, Germany.
  15. Braconier, Henrik & Norbäck, Pehr-Johan & Urban, Dieter, 2003. "Reconciling the Evidence on the Knowledge Capital Model," Working Paper Series, Research Institute of Industrial Economics 590, Research Institute of Industrial Economics.
  16. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, Elsevier, vol. 50(2), pages 449-472, April.
  17. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, Elsevier, vol. 64(1), pages 29-63, October.
  18. Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
  19. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  20. James R. Markusen & Keith E. Maskus, 2001. "Multinational Firms: Reconciling Theory and Evidence," NBER Chapters, in: Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, pages 71-98 National Bureau of Economic Research, Inc.
  21. Egger, Peter & Pfaffermayr, Michael, 2004. "The impact of bilateral investment treaties on foreign direct investment," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 788-804, December.
  22. Greene, William, 2010. "Testing hypotheses about interaction terms in nonlinear models," Economics Letters, Elsevier, Elsevier, vol. 107(2), pages 291-296, May.
  23. Bruce A. Blonigen & Jeremy Piger, 2011. "Determinants of Foreign Direct Investment," NBER Working Papers 16704, National Bureau of Economic Research, Inc.
  24. Bergstrand, Jeffrey H. & Egger, Peter, 2007. "A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises," Journal of International Economics, Elsevier, Elsevier, vol. 73(2), pages 278-308, November.
  25. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
  26. Jennifer Tobin & Susan Rose-Ackerman, 2003. "Foreign Direct Investment and the Business Environment in Developing Countries: the Impact of Bilateral Investment Treaties," William Davidson Institute Working Papers Series 587, William Davidson Institute at the University of Michigan.
  27. Mary Hallward-Driemeier, 2003. "Do bilateral investment treaties attract foreign direct investment? Only a bit - and they could bite," Policy Research Working Paper Series 3121, The World Bank.
  28. Markusen, James R. & Venables, Anthony J. & Eby Konan, Denise & Zhang, Kevin H., 1996. "A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services," Working Paper Series, Research Institute of Industrial Economics 465, Research Institute of Industrial Economics.
  29. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, Elsevier, vol. 76(2), pages 384-399, December.
  30. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
  31. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, Elsevier, vol. 80(1), pages 123-129, July.
  32. Jeffrey H. Bergstrand & Peter Egger, 2006. "Trade Costs and Intra-Industry Trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 142(3), pages 433-458, October.
  33. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, Econometric Society, vol. 70(5), pages 1741-1779, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Lauge N. Skovgaard Poulsen & Emma Aisbett, 2013. "When the claim hits: bilateral investment treaties and bounded rational learning," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 45035, London School of Economics and Political Science, LSE Library.
  2. Dorn, Sabrina & Egger, Peter, 2011. "On the Distribution of Exchange Rate Regime Treatment Effects on International Trade," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8654, C.E.P.R. Discussion Papers.
  3. Eric Neumayer & Peter Nunnenkamp & Martin Roy, 2014. "Are Stricter Investment Rules Contagious? Host Country Competition for Foreign Direct Investment through International Agreements," Kiel Working Papers 1910, Kiel Institute for the World Economy.
  4. Paniagua, Jordi & Sapena, Juan, 2014. "Is FDI doing good? A golden rule for FDI ethics," Journal of Business Research, Elsevier, Elsevier, vol. 67(5), pages 807-812.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3514. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

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.