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The Effect of Treaties on Foreign Direct InvestmentBilateral Investment Treaties, Double Taxation Treaties, and Investment Flows$
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Karl P. Sauvant and Lisa E. Sachs

Print publication date: 2009

Print ISBN-13: 9780195388534

Published to Oxford Scholarship Online: May 2009

DOI: 10.1093/acprof:oso/9780195388534.001.0001

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The Impact on Foreign Direct Investment of BITs *

The Impact on Foreign Direct Investment of BITs *

The Effect of Treaties on Foreign Direct Investment


Oxford University Press

This chapter examines whether the conclusion of BITs does indeed contribute to an increase in FDI. Time-series data analysis based on bilateral FDI flows between the BIT signatory countries shows that the influence of BITs on FDI is weak, especially in redirecting the share of FDI flowing from or to BIT signatory countries. In other words, following the signing of a BIT, it is more likely than not that the host country will marginally increase its share in the outward FDI of the home country; the same applies to the share of the home country in the FDI inflows of the host country. The effect, however, is usually small. In the cross-country comparison of FDI determinants, the overall conclusion is that BITs appear to play a minor and secondary role in influencing FDI flows.

Keywords:   bilateral investment treaties, FDI, time-series analysis, investment inflows, signatory countries

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