IDEAS home Printed from https://ideas.repec.org/p/een/crwfrp/1105.html
   My bibliography  Save this paper

When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning

Author

Listed:
  • Lauge N. Skovgaard Poulsen

    (London School of Economics and Political Science)

  • Emma Aisbett

    (The Australian National University (ANU) - Crawford School of Public Policy; The Australian National University (ANU) - School of Economics)

Abstract

Using the international investment regime as its point of departure, the paper introduces notions of bounded rationality to the study of economic diplomacy. Through a multi-method approach, it shows that developing countries often ignored the risks of bilateral investment treaties (BITs) until they themselves became subject to an investment treaty claim. Thus the behavior of developing country governments with regard to the international investment regime is consistent with that observed for individuals in experiments and field studies: they tend to ignore high-impact, low-probability risks if they cannot bring specific 'vivid' instances to mind.

Suggested Citation

  • Lauge N. Skovgaard Poulsen & Emma Aisbett, 2011. "When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning," Crawford School Research Papers 1105, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:crwfrp:1105
    as

    Download full text from publisher

    File URL: http://www.crawford.anu.edu.au/pdf/crwf_ssrn/crwfrp_1105.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Srividya Jandhyala & Witold J. Henisz & Edward D. Mansfield, 2011. "Three Waves of BITs," Journal of Conflict Resolution, Peace Science Society (International), vol. 55(6), pages 1047-1073, December.
    2. repec:cup:apsrev:v:103:y:2009:i:03:p:387-406_99 is not listed on IDEAS
    3. McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. "Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
    4. Mark Tuil & Louis Visscher, 2010. "Introduction," Chapters,in: New Trends in Financing Civil Litigation in Europe, chapter 1 Edward Elgar Publishing.
    5. Bubb, Ryan J. & Rose-Ackerman, Susan, 2007. "BITs and bargains: Strategic aspects of bilateral and multilateral regulation of foreign investment," International Review of Law and Economics, Elsevier, vol. 27(3), pages 291-311, September.
    6. Aisbett, Emma, 2007. "Bilateral Investment Treaties and Foreign Direct Investment: Correlation versus Causation," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt72m4m1r0, Department of Agricultural & Resource Economics, UC Berkeley.
    7. Levy, Jack S., 1994. "Learning and foreign policy: sweeping a conceptual minefield," International Organization, Cambridge University Press, vol. 48(02), pages 279-312, March.
    8. Bergstrand, Jeffrey H. & Egger, Peter, 2013. "What determines BITs?," Journal of International Economics, Elsevier, vol. 90(1), pages 107-122.
    9. van Harten, Gus, 2007. "Investment Treaty Arbitration and Public Law," OUP Catalogue, Oxford University Press, number 9780199217892.
    10. Simmons, Beth A. & Dobbin, Frank & Garrett, Geoffrey, 2006. "Introduction: The International Diffusion of Liberalism," International Organization, Cambridge University Press, vol. 60(04), pages 781-810, October.
    11. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    12. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    13. David Lake, 2009. "Open economy politics: A critical review," The Review of International Organizations, Springer, vol. 4(3), pages 219-244, September.
    14. Busch, Marc L. & Reinhardt, Eric & Shaffer, Gregory, 2009. "Does legal capacity matter? A survey of WTO Members," World Trade Review, Cambridge University Press, vol. 8(04), pages 559-577, October.
    15. Arellano, Manuel & Honore, Bo, 2001. "Panel data models: some recent developments," Handbook of Econometrics,in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 53, pages 3229-3296 Elsevier.
    16. Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
    17. N. Lesca, 2010. "Introduction," Post-Print halshs-00640602, HAL.
    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


    Cited by:

    1. repec:spr:revint:v:13:y:2018:i:1:d:10.1007_s11558-017-9276-1 is not listed on IDEAS
    2. Eric Neumayer & Peter Nunnenkamp & Martin Roy, 2016. "Are stricter investment rules contagious? Host country competition for foreign direct investment through international agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 177-213, February.
    3. repec:spr:weltar:v:154:y:2018:i:1:d:10.1007_s10290-017-0285-1 is not listed on IDEAS
    4. Timm Betz & Andrew Kerner, 2016. "The influence of interest: Real US interest rates and bilateral investment treaties," The Review of International Organizations, Springer, vol. 11(4), pages 419-448, December.
    5. repec:taf:apeclt:v:23:y:2016:i:11:p:812-815 is not listed on IDEAS
    6. Philipp Hühne & Birgit Meyer & Peter Nunnenkamp & Martin Roy, 2016. "Democracies cooperate more: even where it threatens to bite?," Applied Economics Letters, Taylor & Francis Journals, vol. 23(11), pages 812-815, July.
    7. Dominique Bruhn, 2015. "Coverage and enforceability of investment rules in PTAs: the role of global value chain trade and regulatory differences," FIW Working Paper series 142, FIW.
    8. Aisbett, Emma & Busse, Matthias & Nunnenkamp, Peter, 2016. "Bilateral investment treaties do work: Until they don't," Kiel Working Papers 2021, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    bounded rationality; international political economy; international economic law; bilateral investment treaties;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • F00 - International Economics - - General - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • 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
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:een:crwfrp:1105. 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: (David Stern). General contact details of provider: http://edirc.repec.org/data/asanuau.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.