Foreign Direct Investment and the Business Environment in Developing Countries: the Impact of Bilateral Investment Treaties

Bilateral Investment Treaty’s effects on FDI and the domestic business environment remain unexplored despite the proliferation of treaties over the past several years. This paper asks whether BITs stimulate FDI flows to host countries, and if the treaties have any impact on the environment for domestic private investment. We find a weak relationship between BITs and FDI. However, for risky countries, BITs attract greater amounts of FDI. We also find a weak relationship between BITs and the domestic investment environment. Thus, while BITs may not alter the domestic investment environment, they also may not be fulfilling their primary objective.http://deepblue.lib.umich.edu/bitstream/2027.42/39973/3/wp587.pd