Working Paper #2015-010
North-South FDI and Bilateral Investment Treaties
Bilateral Investment Treaties (BITs) have become increasingly popular as
a means of encouraging FDI from developed to developing countries. We
adopt a matched difference-in-difference estimation to deal with the
problem of endogeneity when estimating the effects of BITs on inward
FDI. Our results indicate that forming a BIT with a developed country
approximately doubles FDI inflows and stocks to developing countries on
average, with a significant part of this arising from the development of
new FDI relationships. The effects of BIT formation on FDI tend to
increase with the size and similarity of the host and source economies
and BITs may be complementary to institutional quality in the host
country.
- Keywords
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- Foreign Direct Investment
- Bilateral Investment Treaties
- Endogenous treatment effects
- JEL codes
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- C21
- F21
Cite this as
APA 7th ed.Falvey, R., & Foster-McGregor, N. (2015). North-South FDI and Bilateral Investment Treaties (UNU-MERIT Working Paper No. 2015-010). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=5638