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Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960-2000


Zachary Elkins


University of Texas, Austin

Andrew T. Guzman


University of California, Berkeley - School of Law

Beth A. Simmons


Harvard University - Department of Government

August 2004

UC Berkeley Public Law Research Paper No. 578961

Abstract:     
Over the past forty-five years, bilateral investment treaties (BITs) have become the most important international legal mechanism for the encouragement and governance of foreign direct investment. Their proliferation over the past two decades in particular has been phenomenal. These intergovernmental treaties typically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute. We argue that the spread of BITs is driven by international competition among potential host countries - typically developing countries - for foreign direct investment. We design and test three different measures of competition. The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so. We also control for diffusion via coercion, social learning, and cultural networks. We find some evidence that coercion plays a role, but less support for learning or cultural explanations. Our main finding is that diffusion in this case is associated with competitive economic pressures among developing countries to capture a share of foreign investment. We are agnostic at this point about the benefits of this competition for development.

Number of Pages in PDF File: 48

Keywords: Bilateral investment treaties, investment, FDI, diffusion

JEL Classification: F00, F02, F20, F21, F23, K33

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Date posted: August 22, 2004  

Suggested Citation

Elkins, Zachary and Guzman, Andrew T. and Simmons, Beth A., Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960-2000 (August 2004). UC Berkeley Public Law Research Paper No. 578961. Available at SSRN: http://ssrn.com/abstract=578961 or http://dx.doi.org/10.2139/ssrn.578961

Contact Information

Zachary Elkins
University of Texas, Austin ( email )
Austin, TX 78712
United States
Andrew T. Guzman (Contact Author)
University of California, Berkeley - School of Law ( email )
215 Boalt Hall
Berkeley, CA 94720-7200
United States
510-642-8074 (Phone)
510-642-3728 (Fax)
HOME PAGE: http://www.andrewguzman.net
Beth A. Simmons
Harvard University - Department of Government ( email )
1737 Cambridge Street
Cambridge, MA 02138
United States
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