Chapter

The Impact of Bilateral Investment Treaties on Foreign Direct Investment *

Peter Egger and Michael Pfaffermayr

in The Effect of Treaties on Foreign Direct Investment

Published in print April 2009 | ISBN: 9780195388534
Published online May 2009 | e-ISBN: 9780199855322 | DOI: https://dx.doi.org/10.1093/acprof:oso/9780195388534.003.0008
 The Impact of Bilateral Investment Treaties on Foreign Direct Investment *

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This chapter conducts an empirical assessment of the impact of BITs on FDI stocks. It estimates several variants of the knowledge-capital model of multinational enterprises (MNEs) using the largest available panel of outward FDI stocks provided by the Organization for Economic Cooperation and Development (OECD), which contains FDI of OECD countries into both OECD and non-OECD economies. It shows significant and positive impact of ratified BITs throughout. The estimated effect of BITs on real outward FDI stocks amounts to about 30% in the preferred specification. The chapter also looks at whether simply signing a BIT will have a positive anticipation effect. It finds a positive impact from signing a treaty, although its magnitude is smaller than that associated with the ratification of an existing treaty. However, the estimated anticipation effect is insignificant, in most specifications, leading the conclusion that the advantages to simply signing a BIT are inconsequential.

Keywords: BITs; FDI; multinational enterprises; MNE; FDI stocks

Chapter.  7203 words. 

Subjects: Public International Law

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