Economics of international investment agreements

Henrik Horn and Thomas Tangerås ()

Journal of International Economics, 2021, vol. 131, issue C

Abstract: Nearly 2700 international investment agreements protect foreign investment against host country policies. This paper analyzes the design and implications of their contentious provisions regarding regulatory expropriations. It derives conditions under which “carve-out” compensation mechanisms, similar to those in actual agreements, solve underinvestment and overregulation problems and simultaneously distribute surplus according to countries' bargaining power. The paper examines a number of additional policy relevant issues, for instance, how to modify agreements when carve-out compensation is inefficient, whether agreements cause “regulatory chill,” and the different motives and distributional consequences of North-South versus North-North agreements.

Keywords: Carve-out compensation; Foreign investment; International investment agreement; Regulatory chill; Regulatory expropriation (search for similar items in EconPapers)
JEL-codes: F21 F23 F53 K33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:131:y:2021:i:c:s0022199621000106

DOI: 10.1016/j.jinteco.2021.103433

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