Do Bilateral Investment Treaties Promote Foreign Direct Investment? Some Hints from Alternative Evidence

36 Pages Posted: 23 Apr 2010 Last revised: 13 Jul 2010

Jason W. Yackee

University of Wisconsin Law School

Date Written: March 22, 2010

Abstract

In this article I present a multi-method examination of whether bilateral investment treaties, or BITs, are likely to promote inflows of foreign direct investment. Using regression analysis I show that BITs are not meaningfully correlated with measures of political risk, and using survey evidence I show that providers of political risk insurance do not reliably take BITs into account when deciding the terms of insurance. Nor do in-house counsel in large U.S. corporations view BITs as playing a major role in their companies' foreign investment decisions. In contrast to existing empirical studies, which claim to prove that BITs can have massive positive impacts on FDI, my results suggest that such results are probably spurious. BITs are unlikely to be a significant driver of foreign investment.

Keywords: Foreign Direct Investment, Bilateral Investment, Treaties, International Law

JEL Classification: K33

Suggested Citation

Yackee, Jason W., Do Bilateral Investment Treaties Promote Foreign Direct Investment? Some Hints from Alternative Evidence (March 22, 2010). University of Wisconsin Legal Studies Research Paper No. 1114. Available at SSRN: https://ssrn.com/abstract=1594887 or http://dx.doi.org/10.2139/ssrn.1594887

Jason W. Yackee (Contact Author)

University of Wisconsin Law School ( email )

975 Bascom Mall
Madison, WI 53706
United States

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