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North‐South foreign direct investment and bilateral investment treaties
Author(s) -
Falvey Rod,
FosterMcGregor Neil
Publication year - 2018
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12539
Subject(s) - foreign direct investment , international economics , developing country , economics , sample (material) , investment (military) , bit (key) , international trade , monetary economics , macroeconomics , economic growth , political science , politics , computer science , chemistry , computer security , chromatography , law
Bilateral investment treaties ( BIT s) have become increasingly popular as a means of encouraging foreign direct investment ( FDI ) from developed to developing countries. We adopt a difference‐in‐difference analysis to deal with the problem of self‐selection when estimating the effects of BIT s on FDI flows from a sample of OECD countries to a broader sample of lesser developed countries. Our results indicate that forming a BIT with a developed country significantly increases FDI inflows to developing countries. We further find that the development of new FDI flows and the reinvigoration of deteriorating FDI relationships accounts for the majority of the increase in FDI flows due to BIT formation.