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



Author(s)

Michael Jacobs

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DOI:10.17265/2328-2134/2017.10.001

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.

bilateral investment treaties, BITs, foreign direct investment, multinational corporations, less developed countries, developing countries