DP11879 Economics and Politics of International Investment Agreements
|Author(s):||Henrik Horn, Thomas Tangerås|
|Publication Date:||February 2017|
|Keyword(s):||expropriation, Foreign direct investment, international investment agreements, regulatory chill|
|JEL(s):||F21, F23, F53, K33|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11879|
We analyze the optimal design and implications of international investment agreements. These are ubiquitous, potent and heavily criticized state-to-state treaties that protect foreign investors against host country policies. Optimal agreements cause national but not global underregulation ("regulatory chill"). The incentives to form agreements and their distributional consequences depend on countries. unilateral commitment possibilities and the direction of investment flows. Foreign investors benefit from agreements between developed countries at the expense of the rest of society, but not in the case of agreements between developed and developing countries.