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Do International Investment Agreements attract Foreign Direct Investment inflows? Revisiting the literature

Author

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  • Gopalan, Sasidaran
  • Park, Cyn-Young
  • Rajan, Ramkishen S.

Abstract

Empirical research assessing the effects of International Investment Agreements (IIAs) on Foreign Direct Investment (FDI) flows proliferated since the late 1990s, largely coinciding with an acceleration in the signing of such investment treaties between the developed countries and emerging market and developing economies (EMDEs). This paper offers a comprehensive survey of the literature on the impact of IIAs on FDI flows, with a specific focus on EMDEs. The main goal of the review is to highlight the important themes that emerge from the literature and how each of those themes have been addressed by the existing studies. Despite the proliferation of studies on this topic, the literature remains highly inconclusive as to whether IIAs matter when it comes to attracting FDI flows. A substantive part of the empirical ambiguity arises for two broad reasons. First, there have been methodological constraints in disentangling co-movements from causal effects when it comes to estimating the impact of IIAs on FDI flows. Second, studies have suffered from the general paucity of granular data on IIAs which allow for a systematic unpacking of various IIA provisions on FDI inflows.

Suggested Citation

  • Gopalan, Sasidaran & Park, Cyn-Young & Rajan, Ramkishen S., 2023. "Do International Investment Agreements attract Foreign Direct Investment inflows? Revisiting the literature," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 471-481.
    • Handle: RePEc:eee:ecanpo:v:80:y:2023:i:c:p:471-481
    DOI: 10.1016/j.eap.2023.09.002
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