Journal Article

Do Trade and Investment Agreements Lead to More FDI? Accounting for Key Provisions Inside the Black Box

Authors

  • Axel Berger
  • Matthias Busse
  • Peter Nunnenkamp
  • Martin Roy
Publication Date

The previous literature provides a highly ambiguous picture on the impact of trade and investment agreements on FDI. Most empirical studies ignore the actual content of BITs and RTAs, treating them as "black boxes", despite the diversity of investment provisions constituting the essence of these agreements. We overcome this serious limitation by analysing the impact of modalities on the admission of FDI and dispute settlement mechanisms in both RTAs and BITs on bilateral FDI flows between 1978 and 2004. We find that FDI reacts positively to RTAs only if they offer liberal admission rules. Dispute settlement provisions play a minor role. In contrast to RTAs, foreign investors tend to respond favourably to the mere existence of BITs.

Info

JEL Classification
F21, F23, K33
DOI
10.1007/s10368-012-0207-6

Key Words

  • admission rules
  • ausländische Direktinvestitionen
  • bilateral investment treaties
  • foreign direct investment
  • investor-state dispute settlement
  • regional trade agreements