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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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Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis *

Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis *

The Effect of Treaties on Foreign Direct Investment

Tim Büthe

Helen V. Milner

Oxford University Press

This chapter examines the effect of bilateral investment treaties (BITs) on inward foreign direct investment flows (FDI) into least developed countries (LDCs). It suggests that BITs should not only boost FDI between the signatory states but more broadly increase inward FDI into the developing country signatory. The chapter begins with a discussion of the often narrow, legalistic conceptualization of BITs in previous studies, as well as previous dyadic and monadic empirical findings. It presents a statistical analysis of inward FDI flows into 122 developing countries with a population of more than 1 million from 1970 to 2000, and a qualitative analysis of the hypothesized causal mechanisms. It shows that the positive correlation between BITs and subsequent FDI is driven by the hypothesized causal mechanisms.

Keywords:   BIT, FDI, investment flows, developing countries, LDC, least developed countries

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