Do Bilateral Investment Treaties Affect FDI Flows? A Retrospective Study with Some Implications for Asia

摘要

The effects of bilateral investment treaties (BITs) on foreign direct investment (FDI) is a controversial topic. This paper, extending the work of Neumayer and Spess (2005), supports the argument for positive effects. In particular, this study observed that a positive effect on FDI flows occurred when neighbouring countries competed for BIT ratification. This finding was robust, regardless of whether a parametric (the difference-in-differences method) or non-parametric (i.e. the propensity score matching) estimation method was used. One overall policy implication from this estimation which is especially pertinent to countries in the Asia region is that a country's policy function to attract FDI may need to take into account neighbouring countries' FDI policies.