Do Additional Bilateral Investment Treaties Boost Foreign Direct Investments?

Chang Hoon Oh and Michele Fratianni

No 43, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: This paper finds that the stock of bilateral investment treaties (BIT) is subject to diminishing returns measured in terms of foreign direct investment flows. Diminishing returns are more pronounced among country-pairs that have not signed bilateral investment treaties but have their own BIT network than among country-pairs with their own bilateral investment treaties. For a given country's BIT network, a multinational enterprise finds more value in investing where a bilateral treaty is in place. This may suggest either stronger property-rights protection or greater latitude to use the host country as an export platform. Our subsidiary finding is that an index of a country's BIT network diversity appears to be a plausible explanation of the limiting force underlying the diminishing returns of the stock of BITs in a world where there is a mix between horizontally and vertically integrated multinational enterprises.

Keywords: bilateral investment treaty; foreign direct investment; gravity equation; network diversity (search for similar items in EconPapers)
JEL-codes: F21 F53 (search for similar items in EconPapers)
Pages: 31
Date: 2010-10
New Economics Papers: this item is included in nep-ifn and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Do Additional Bilateral Investment Treaties Boost Foreign Direct Investments? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:anc:wmofir:43

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