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The Economics of Investor Protection: ISDS versus National Treatment

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  • Kohler, Wilhelm Kaspar
  • Stähler, Frank

Abstract

This paper scrutinizes the effects of investor-state dispute settlements (ISDS) and national treatment provisions in a two-period model where foreign investment is subject to domestic regulation and a holdup problem. It shows that ISDS can mitigate the holdup problem and increases aggregate welfare, but comes with additional regulatory distortions for the first period. A national treatment provision avoids these regulatory distortions, but implies entry distortions because it makes the holdup problem also apply to domestic firms. If the domestic regulatory framework applies to many domestic firms, a national treatment provision welfare-dominates ISDS.

Suggested Citation

  • Kohler, Wilhelm Kaspar & Stähler, Frank, 2016. "The Economics of Investor Protection: ISDS versus National Treatment," Annual Conference 2016 (Augsburg): Demographic Change 145652, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc16:145652
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    References listed on IDEAS

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    Cited by:

    1. Martin Richardson & Frank Stähler, 2017. "International Agreements, Economic Sovereignty and Exit," ANU Working Papers in Economics and Econometrics 2017-657, Australian National University, College of Business and Economics, School of Economics.
    2. Horn, Henrik & Tangerås, Thomas, 2016. "Economics and Politics of International Investment Agreements," Working Paper Series 1140, Research Institute of Industrial Economics.
    3. Eckhard Janeba, 2016. "Regulatory Chill and the Effect of Investor State Dispute Settlements," CESifo Working Paper Series 6188, CESifo Group Munich.
    4. Schjelderup, Guttorm & Stähler, Frank, 2017. "Investor State Dispute Settlement and Multinational Firm Behavior," Discussion Papers 2017/4, Norwegian School of Economics, Department of Business and Management Science.
    5. repec:eee:eecrev:v:98:y:2017:i:c:p:341-353 is not listed on IDEAS
    6. Konrad, Kai A., 2017. "Large investors, regulatory taking and investor-state dispute settlement," European Economic Review, Elsevier, vol. 98(C), pages 341-353.

    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
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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