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The Regional Impact of Bilateral Investment Treaties on Foreign Direct Investment

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Listed:
  • Arjan Lejour

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Maria Salfi

Abstract

We examine the impact of bilateral investment treaties (BITs) on bilateral FDI stocks using extensive data from 1985 until 2011. We correct for endogeneity using indicators for governance and membership of international organisations. We find that ratified BITs increase on average bilateral FDI stocks by 35% compared to those of country pairs without a treaty. Upper middle income countries seem to benefit the most from ratified treaties whereas high income countries with high governance levels do not profit at all. In addition, lower middle and low income countries experience significantly larger inward FDI stocks from partner’s countries. Distinguishing by region, we find that ratified BITs increase FDI stocks mainly in East Asia and Middle & Eastern Europe.

Suggested Citation

  • Arjan Lejour & Maria Salfi, 2015. "The Regional Impact of Bilateral Investment Treaties on Foreign Direct Investment," CPB Discussion Paper 298, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:298
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    References listed on IDEAS

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    Cited by:

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    2. Horn, Henrik & Tangerås, Thomas, 2016. "Economics and Politics of International Investment Agreements," Working Paper Series 1140, Research Institute of Industrial Economics.
    3. Benfratello, Luigi & D’Ambrosio, Anna & Sangrigoli, Alida, 2023. "Foreign Direct Investments in Africa: Are Chinese investors different?," Journal of Business Research, Elsevier, vol. 155(PA).
    4. Andrea Goldstein & Alessia Amighini & Karl P. Sauvant, 2016. "China, the G20 and the International Investment Regime," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(4), pages 73-92, July.

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    More about this item

    JEL classification:

    • 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
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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