Do Bilateral Investment Treaties Promote Foreign Direct Investment? Some Hints from Alternative Evidence
36 Pages Posted: 23 Apr 2010 Last revised: 13 Jul 2010
Date Written: March 22, 2010
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: Suggested Citation