North-South FDI and Bilateral Investment Treaties

29  February 2016    4:00 pm

Neil Foster-McGregor, UNU-MERIT

In cooperation with:
Research Centre International Economics (FIW) 


wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (ground floor)


Neil Foster-McGregor

Bilateral Investment Treaties (BITs) have become increasingly popular as a means of encouraging FDI from developed to developing countries. We adopt a difference-in-difference analysis to deal with the problem of self-selection when estimating the effects of BITs on FDI flows from a sample of OECD countries to a broader sample of lesser developed countries. Our results indicate that forming a BIT with a developed country significantly increases FDI inflows to developing countries, with BITs found to double FDI flows in some specifications. We further find that FDI flows along the extensive margin are much more responsive to BIT formation than flows along the intensive margin.


Keywords: Foreign Direct Investment, Bilateral Investment Treaties, Endogenous treatment effects

JEL classification: C21, F21