North-South FDI and Bilateral Investment Treaties

Rodney Falvey and Neil Foster-McGregor

No 2015-010, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (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.

Keywords: Single Equation Models; Quantile Regressions; International Investment; Long-term Capital Movements; North-South investment; FDI (search for similar items in EconPapers)
JEL-codes: C21 F21 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2015010

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