Investor-State Dispute Settlement and Multinational Firm Behavior

25 Pages Posted: 3 Sep 2020

See all articles by Guttorm Schjelderup

Guttorm Schjelderup

Norwegian School of Economics (NHH) - Department of Business and Management Science

Frank Stähler

University of Tuebingen - Department of Economics; University of Adelaide - School of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: August 28, 2020

Abstract

This paper shows that Investor-State Dispute Settlements (ISDS) makes multinational firms more aggressive by increasing cost-reducing investments with the aim to enlarge the potential compensation an ISDS provision may offer. While a larger investment reduces the market distortion, it will also make potential compensations larger. Consequently, potential compensations to a foreign investor do not imply a zero-sum game. ISDS may decrease domestic welfare, in particular if the investment leads to the establishment of an export platform, and we find that even global welfare may decline.

Keywords: Investor-State Dispute Settlement, Multinational Enterprises, Foreign Direct Investment, TTIP, TPP

JEL Classification: F21, F23, F53, F55

Suggested Citation

Schjelderup, Guttorm and Stähler, Frank, Investor-State Dispute Settlement and Multinational Firm Behavior (August 28, 2020). NHH Dept. of Business and Management Science Discussion Paper No. 2020/9, Available at SSRN: https://ssrn.com/abstract=3682551 or http://dx.doi.org/10.2139/ssrn.3682551

Guttorm Schjelderup (Contact Author)

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Frank Stähler

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

HOME PAGE: http://www.frank-staehler.de

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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