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North-South FDI and Bilateral Investment Treaties

Author

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  • Falvey R.
  • Foster-McGregor N.

    (UNU-MERIT)

Abstract

Bilateral Investment Treaties BITs have become increasingly popular as a means of encouraging FDI from developed to developing countries. We adopt a matched difference-in-difference estimation to deal with the problem of endogeneity when estimating the effects of BITs on inward FDI. Our results indicate that forming a BIT with a developed country approximately doubles FDI inflows and stocks to developing countries on average, with a significant part of this arising from the development of new FDI relationships. The effects of BIT formation on FDI tend to increase with the size and similarity of the host and source economies and BITs may be complementary to institutional quality in the host country.

Suggested Citation

  • Falvey R. & Foster-McGregor N., 2015. "North-South FDI and Bilateral Investment Treaties," MERIT Working Papers 2015-010, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2015010
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    References listed on IDEAS

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    2. Rod Falvey & Neil Foster-McGregor, 2017. "Heterogeneous effects of bilateral investment treaties," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(4), pages 631-656, November.

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    More about this item

    Keywords

    Single Equation Models; Quantile Regressions; International Investment; Long-term Capital Movements; North-South investment; FDI;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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