Template-type: ReDif-Paper 1.0 
Author-Name: Falvey, Rod
Author-Email: rfalvey@bond.edu.au
Author-workplace-name: Bond Business School, Bond University
Author-Name: Foster-McGregor, Neil
Author-Email: foster@merit.unu.edu
Author-workplace-name: UNU-MERIT, and Maastricht University
Title: Heterogeneous effects of bilateral investment treaties
Abstract: Bilateral Investment Treaties (BITs) are an increasingly used policy 
	 instrument to encourage FDI inflows, particularly inflows into 
	 developing countries. In this paper we estimate a gravity model of FDI 
	 flows from a sample of OECD countries to a broader sample of developing 
	 economies, examining the impact of BITs on these flows. BITs are signed 
	 between highly heterogeneous country-pairs, with important differences 
	 found in terms of the institutional and economic distance between BIT 
	 signatories. These differences may help explain the mixed results on the 
	 effects of BITs on FDI flows in the existing literature, with our 
	 exploration of non-linearities in this relationship suggesting that the 
	 effects of BITs are increasing in the difference in GDP and GDP per 
	 capita between source and host. BITs appear to have no impact upon FDI 
	 flows for country-pairs that are too dissimilar in terms of the strength 
	 of their political institutions.
Keywords: Foreign Direct Investment, FDI Inflows, Developing countries, Economic
	 development, Bilateral Investment Treaties, Heterogeneous Effects
Classification-JEL: C21, F21, O16
Series: UNU-MERIT Working Papers
Creation-Date: 20170619
Number: 2017-027
File-URL: https://unu-merit.nl/publications/wppdf/2017/wp2017-027.pdf
File-Format: application/pdf
File-Size: 275 kb
Handle: RePEc:unm:unumer:2017027