Abstract
This chapter attempts to estimate the effect of investment treaties and some
of their provisions on direct investment flows. It focuses on the question of
whether Bilateral Investment Treaties (bits), and those offering treaty-based
Investor-State Dispute Settlement (isds), lead to significant increases in inbound foreign direct investment (fdi). The chapter makes two contributions
to the existing literature that estimates the effects of bits on fdi. First, it deploys a knowledge capital model of fdi that has theoretical underpinnings
consistent with firm behaviour, instead of the typical gravity model originally
developed for explaining international trade flows. Second, it constructs a
large dataset of explanatory variables over 30 years for a large number of bilateral investment relationships globally. The results of the econometric analysis
generates complex results concerning the historical impact of isds on investment. bits have a positive and significant effect on fdi and weaker isds provisions have a larger effect on fdi than stronger isds provisions. The results are
consistent and larger in magnitude for the sub-sample of asean + 3 economies. Such results are also robust to different model specifications and across
different time periods.
| Original language | English |
|---|---|
| Title of host publication | International Investment Treaties and Arbitration Across Asia |
| Editors | Julien Chaisse and Luke Nottage |
| Place of Publication | London |
| Publisher | Brill - Nijhoff |
| Edition | 1 |
| ISBN (Print) | 9789004360105 |
| Publication status | Published - 2018 |