Economics and Politics of International Investment Agreements

57 Pages Posted: 3 Apr 2017 Last revised: 15 Sep 2017

See all articles by Henrik Horn

Henrik Horn

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR); Bruegel

Thomas Tangerås

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: August 28, 2017

Abstract

We analyze the optimal design and implications of international investment agreements. These are ubiquitous, potent and heavily criticized state-to-state treaties that compensate foreign investors against host country policies. Optimal agreements cause national but not global underregulation ("regulatory chill"). The incentives to form agreements and their distributional consequences depend on countries' unilateral commitment possibilities and the direction of investment flows. Foreign investors benefit from agreements between developed countries at the expense of the rest of society, but not in the case of agreements between developed and developing countries.

Keywords: Foreign direct investment; expropriation; international investment agreements; regulatory chill.

JEL Classification: F21; F23; F53; K33

Suggested Citation

Horn, Henrik and Tangerås, Thomas, Economics and Politics of International Investment Agreements (August 28, 2017). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2017/19. Available at SSRN: https://ssrn.com/abstract=2945335 or http://dx.doi.org/10.2139/ssrn.2945335

Henrik Horn (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.econ-law.se

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://www.econ-law.se

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Thomas Tangerås

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/thomast

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