, and two anonymous referees for helpful comments and suggestions. The authors gratefully acknowledge financial support from the Scottish Institute for Research in Economics (SIRE). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Most of the literature dealing with the location of foreign direct investment (FDI) has ignored the fact that multinational enterprises (MNE) are not stateless and that their activities take place within an international political system: the return on their FDI can be greatly in uenced by the quality of interstate political relations between their home and host countries. This paper investigates whether the quality of interstate political relations between countries in uences the volume of bilateral FDI. Thanks to the construction of a new indicator of the quality of interstate political relations, it is found that better interstate political relations foster bilateral FDI, though the signature of a bilateral investment treaty (BIT) may dampen the impact of their uctuations. In addition, the e ect of a variation in the quality of domestic institutions increases with the entry into force of a BIT, suggesting that the latter signals the credibility of an institutional improvement. Overall, when both indirect e ects are considered, the entry into force of a BIT increases bilateral FDI stocks by 16%, on average, a lower impact than those found in previous studies. This e ect nevertheless signi cantly di ers according to the quality of both interstate political relations and domestic institutions. Résumé: La littérature sur la localisation des investissements directs à l'étranger (IDE) ignore, en grande partie, le fait que les entreprises multinationales ne sont pas apatrides et que leurs activités prennent place dans le système politique international. Leur retour sur investissement peut ainsi être grandement a ecté par la qualité des relations politiques entre leur pays d'origine et le pays hôte de leurs investissements. Cet article étudie dans quelle mesure la qualité des relations politiques entre Etats in uence le volume des IDE bilatéraux. En construisant un nouvel indicateur de la qualité des relations politiques internationales, nous montrons qu'entretenir de bonnes relations politiques favorise les IDE bilatéraux. La signature d'un traité bilatéral d'investissement (TBI) limite cependant la pertinence des relations politiques pour les décisions d'investissement. Par ailleurs, l'e et d'une amélioration des institutions domestiques augmente avec l'entrée en application d'un TBI, ce qui suggère que ces accords signalent la crédibilité des institutions domestiques. Dans l'ensemble, lorsque ces deux e ets sont pris en compte, l'entrée en vigueur d'un TBI augmente les stocks bilatéraux d'IDE de 16% en moyenne, un impact moins important que ceux trouvés dans les études précédentes. L'ampleur de cet e et varie cependant beaucoup selon la qualité des relations politiques entre Etats et des institutions domestiques.Mots clés : Investissement direct à l'étranger, Relations politiques internationales, Traités bilatéraux d'investissement, Institutions. JEL classi cation: F21, F53, F59 * We thank Keith Head, Thierry Mayer and Ian Wooton for their helpful comments. A previous version of the paper, entitled Being...

This paper develops a theory of optimal fertility behavior under mortality shocks. In an OLG model, young adults determine their optimal fertility, labor supply and life-cycle consumption with both exogenous child and adult mortality risks. We show that a rise in adult mortality exerts an ambiguous effect on both net and total fertility in a general equilibrium framework, while child mortality shocks unambiguously lead to a rise in total fertility, leaving net fertility unchanged. We complement our theory with an empirical analysis using a sample of 39 Sub-Saharan African (SSA) countries over the 1980-2004 period, examining the overall effects of the child and adult mortality channels on both total and net fertility. We find child mortality to exert a robust, positive impact on total fertility but no impact on net fertility, whereas a rise in adult mortality is found to negatively influence both total and net fertility. Given the particular demographic profile of the HIV/AIDS epidemic (killing essentially young, active adults), we then conclude in favor of an unambiguous negative effect of the HIV/AIDS epidemic on net fertility in SSA.

Relying on a large foreign direct investment (FDI) transaction level dataset, unique both in terms of disaggregation and time and country coverage, this paper examines patterns in greenfield (GF) versus merger and acquisition (M&A) investment. Although both are found to seek out large markets with low international barriers, important differences emerge. M&A is more affected by geographic and cultural barriers and exhibits opportunistic behaviours as it is more sensitive to temporary shocks such as a currency crisis. Further, M&A is more affected by destination factors such as financial development and institutional quality. GF, on the other hand, is relatively more driven by factors such as origin comparative advantage and destination taxes. These empirical facts are consistent with the conceptual distinction made between these two modes, i.e., M&A involves transfer of ownership for integration or arbitrage reasons while GF relies on firms’ own capacities, which are linked to origin country attributes. They also suggest that GF and M&A are likely to respond differently to policies intended to attract FDI.

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