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Do bilateral investment treaties attract foreign direct investment? The role of international dispute settlement provisions
Author(s) -
Frenkel Michael,
Walter Benedikt
Publication year - 2019
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.12743
Subject(s) - foreign direct investment , settlement (finance) , international economics , order (exchange) , investment (military) , international trade , index (typography) , international investment , bilateral investment treaty , business , economics , law , political science , finance , politics , macroeconomics , world wide web , computer science , payment
This paper studies the effects of the strength of bilateral investment treaties ( BIT s) on foreign direct investment ( FDI ) activity. We develop an index for the strength of international dispute settlement provisions included in BIT s in order to examine the role the content of BIT s plays in attracting FDI . To this end, we make use of data from UNCTAD 's International Investment Agreement Mapping Project and measure the provision strength of 2,571 BIT s. Using panel data of bilateral and total FDI inflows and inward FDI stocks, we study the effect of BIT s on FDI . Our main finding indicates that stronger international dispute settlement provisions in BIT s are indeed associated with positive effects on FDI activity.