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Evaluating the Impact of BITs and Preferential Trade and Investment Treaties on Foreign Direct Investment between Developed Countries

Napalkov, Nikita LU (2016) NEKN01 20161
Department of Economics
Abstract
This paper focuses on the effect of Bilateral Investment Treaties and Preferential Trade and Investment Agreements on outwards FDI stocks of developed countries (proxied by OECD countries) in one another in the period of 1985-2013. Estimations are obtained with use of the gravity equation in a large panel based on OECD FDI positions data, where the “knowledge-and-physical-capital model” of international investment motivates the choice of independent variables. This research is the first one to analyze the effect of both types of investment agreements on FDI of developed countries; moreover the most recent data available is used.

Empirical analysis reveals an absence of statistically significant positive effect for FDI of both BITs and... (More)
This paper focuses on the effect of Bilateral Investment Treaties and Preferential Trade and Investment Agreements on outwards FDI stocks of developed countries (proxied by OECD countries) in one another in the period of 1985-2013. Estimations are obtained with use of the gravity equation in a large panel based on OECD FDI positions data, where the “knowledge-and-physical-capital model” of international investment motivates the choice of independent variables. This research is the first one to analyze the effect of both types of investment agreements on FDI of developed countries; moreover the most recent data available is used.

Empirical analysis reveals an absence of statistically significant positive effect for FDI of both BITs and PTIAs with exception of a strong positive effect associated with joining the EU. Although the results are robust to changes in independent variables and estimation techniques, sensitivity analysis suggests that BITs had a stronger positive effect on FDI (34%) in the period of 1985-2000. PTIAs appear to have mixed effect on FDI because of the connection between trade and investment. Overall the findings reinforce doubts voiced about the effectiveness of bilateral treaties as a policy measure for increasing FDI attractiveness. Existence of such treaties between OECD countries may be partly explained by a growing wish on their part to create more liberalized and open markets rather than simply protect investment abroad. (Less)
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author
Napalkov, Nikita LU
supervisor
organization
course
NEKN01 20161
year
type
H1 - Master's Degree (One Year)
subject
keywords
preferential trade and investment agreement, bilateral investment treaty, Foreign direct investment, gravity equation, OECD
language
English
id
8889693
date added to LUP
2016-09-09 14:04:46
date last changed
2016-09-09 14:04:46
@misc{8889693,
  abstract     = {This paper focuses on the effect of Bilateral Investment Treaties and Preferential Trade and Investment Agreements on outwards FDI stocks of developed countries (proxied by OECD countries) in one another in the period of 1985-2013. Estimations are obtained with use of the gravity equation in a large panel based on OECD FDI positions data, where the “knowledge-and-physical-capital model” of international investment motivates the choice of independent variables. This research is the first one to analyze the effect of both types of investment agreements on FDI of developed countries; moreover the most recent data available is used.

Empirical analysis reveals an absence of statistically significant positive effect for FDI of both BITs and PTIAs with exception of a strong positive effect associated with joining the EU. Although the results are robust to changes in independent variables and estimation techniques, sensitivity analysis suggests that BITs had a stronger positive effect on FDI (34%) in the period of 1985-2000. PTIAs appear to have mixed effect on FDI because of the connection between trade and investment. Overall the findings reinforce doubts voiced about the effectiveness of bilateral treaties as a policy measure for increasing FDI attractiveness. Existence of such treaties between OECD countries may be partly explained by a growing wish on their part to create more liberalized and open markets rather than simply protect investment abroad.},
  author       = {Napalkov, Nikita},
  keyword      = {preferential trade and investment agreement,bilateral investment treaty,Foreign direct investment,gravity equation,OECD},
  language     = {eng},
  note         = {Student Paper},
  title        = {Evaluating the Impact of BITs and Preferential Trade and Investment Treaties on Foreign Direct Investment between Developed Countries},
  year         = {2016},
}