Do Bilateral Investment Treaties Attract Foreign Direct Investment to Developing Countries? A Review of the Empirical Literature

Abstract

States have signed over 3,000 bilateral investment treaties (BITs). BITs stipulate the terms and conditions by which foreign investors from one country must be treated in another. A series of empirical studies have asked the question, do BITs increase foreign direct investment to less developed countries? This paper reviews the literature. While the studies come to conflicting results, most studies suffer from the same methodological misstep-they fail to account for variation in treaties. The paper concludes that the most productive path forward for future research efforts includes using dyadic research designs that account for variation in BITs.

Impact of International Investment Agreements on Japanese FDI: A firm‐level analysis†

“…Many empirical studies have been conducted since the 1990s. In addition, several useful survey articles have been published, including Jacobs (2017) and Pohl (2018). The results of empirical studies are mixed in that some studies found a positive impact, whereas others did not.…”

International investment agreements and foreign direct investment: A survey

“…The mixed evidence on the effects of IIAs on FDI in particular from DCs in LDCs led to doubts about the existence of the ‘grand bargain’ and the asymmetry in rent sharing between DC investors and LDC hosts (see Jacobs, 2017).…”