Do Trade and Investment Agreements Lead to More FDI? Accounting for Key Provisions Inside the Black Box
AbstractThe previous literature provides a highly ambiguous picture on the impact of trade and investment agreements on FDI. Most empirical studies ignore the actual content of BITs and RTAs, treating them as "black boxes", despite the diversity of investment provisions constituting the essence of these agreements. We overcome this serious limitation by analyzing the impact of modalities on the admission of FDI and dispute settlement mechanisms in both RTAs and BITs on bilateral FDI flows between 1978 and 2004. We find that FDI reacts positively to RTAs only if they offer liberal admission rules. Dispute settlement provisions play a minor role. While RTAs without strong investment provisions may even discourage FDI, the reactions to BITs are less discriminate with foreign investors responding favourably to the mere existence of BITs
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1647.
Length: 26 pages
Date of creation: Sep 2010
Date of revision:
foreign direct investment; bilateral investment treaties; regional trade agreements; admission rules; investor-state dispute settlement;
Other versions of this item:
- Axel Berger & Matthias Busse & Peter Nunnenkamp & Martin Roy, 2013. "Do trade and investment agreements lead to more FDI? Accounting for key provisions inside the black box," International Economics and Economic Policy, Springer, vol. 10(2), pages 247-275, June.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
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- 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.
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