Does Investment Treaty Affect the Improvement on FDI?

Eunsook Seo ()
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Eunsook Seo: Sangmyung University

East Asian Economic Review, 2008, vol. 12, issue 2, 121-150

Abstract: The paper analyzes how investment treaty affects investment creation. Analysis results show that investment treaty could not directly affect the increase in investment with the form of investment agreement contradicting and the opening of investment treaty countries have increased a great deal of investment. Contracting the investment agreement means to ultimately improve the investment environment such as policy transparency, simplification of administration, and the simplification or the clearness of law regulation. Thus, this paper also focuses on the relation between contracting the investment treaty and the improvement of investment environment. According to these analyses, investment treaty contracting increases foreign direct investment (FDI) inflow by 7.04~8.87% on averagThe paper analyzes how investment treaty affects investment creation. Analysis results show that investment treaty could not directly affect the increase in investment with the form of investment agreement contradicting and the opening of investment treaty countries have increased a great deal of investment. Contracting the investment agreement means to ultimately improve the investment environment such as policy transparency, simplification of administration, and the simplification or the clearness of law regulation. Thus, this paper also focuses on the relation between contracting the investment treaty and the improvement of investment environment. According to these analyses, investment treaty contracting increases foreign direct investment (FDI) inflow by 7.04~8.87% on average through the improvement of investment environment compared to the countries that do not improve the investment environment. Also, it shows that the FDI inflow from other countries than the investment agreement country is 5.02~ 5.5% higher on average than countries that did not contract investment treaty when investment environment was improved.

Keywords: Investment Treaty; FDI; Gravity Model (search for similar items in EconPapers)
JEL-codes: F14 F21 F42 (search for similar items in EconPapers)
Date: 2008
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