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When an investor sues a state for alleged breaches of its obligations under an investment treaty or a trade agreement with investment provisions, all that should matter for who wins the case are the merits of the claim itself. Alas, investor-to-state dispute settlement (ISDS) does not take place in a vacuum. Such cases are decided by a tribunal typically consisting of three arbitrators, one each nominated by the two parties while the president is mutually agreed upon. We demonstrate that the kind of involvement of these arbitrators in previous ISDS cases matters for the case under dispute. Specifically, we show that what we label the president's pro-investor bias - the number of times they have previously been nominated by an investor minus the number of times they have represented respondent states - raises the likelihood that an investor wins an ISDS case. An investor can further raise its chances of prevailing by appointing an arbitrator with greater experience, defined as the number of ISDS cases they have previously been involved in. Greater experience of the state-appointed arbitrator has no independent effect but conditions the effect that president bias has. Given the president's crucial role, the main implication of our findings is that presidents should be drawn from among those who have not systematically represented more one side than the other in previous cases.

This study examines the effects of greenfield FDI and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 130 countries for the period from 2003-2011, the study specifically tests the compensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries.

We estimate gravity-type models to assess the effects of financial market development in the host and source countries on bilateral FDI stocks. We address potential reverse causality, inter alia by performing instrumental variable estimations and restricting the sample to observations where reverse causality, if existent, should be less relevant. Our major and robust finding is that bilateral FDI increases with better developed financial markets in both the host and the source country. Furthermore, for developing host countries, we find evidence that financial market development in source and host countries function as substitutes for each other.

The recent boom of investor-state disputes filed under international investment agreements has fueled a controversial academic and policy debate. Despite its importance, there has been very little work to date on the impacts of compensation claims by investors on FDI flows to the responding host country. We study this question using a comprehensive dataset of FDI flows, compensation claims and bilateral investment treaty (BIT) participation. We allow for differential impacts of compensation claims against a host on inward FDI flows from BIT-partner and non-partner countries. Focusing on these differences allows us both to shed new light on how investment treaties might influence investor behavior, as well as allowing us to control for unobserved changes in the host-country investment climate. We find that BITs stimulate bilateral FDI flows from partner countries - but only so long as the host country has not had a claim brought against it to arbitration. When a host faces a claim, FDI from sources with a BIT in place falls significantly more than that from unprotected sources. Furthermore, after the host has faced a claim, the entry into force of new BITs is no longer associated with increased FDI flows.

We assess the role of capital goods imports and inflows of foreign direct investment (FDI) as transmission channels through which major emerging economies (BRICs, i.e., Brazil, Russian Federation, India and China) could catch up with advanced source countries in terms of total factor productivity (TFP). We find that the importance of these transmission mechanisms depends on the BRICs' local capacity to absorb superior technologies and on domestic investment.

It is open to question whether the intensified worldwide competition for FDI has reduced its traditionally strong concentration in a few large and relatively advanced host countries. We calculate and decompose Theil indices to track changes in absolute and relative concentration of FDI during the period 1970-2013. We find that both absolute and relative concentration decreased when excluding offshore financial centers from the overall sample. In addition to the narrowing gap between OECD and non-OECD countries, the concentration across non-OECD countries declined – for major subgroups and for both the absolute and relative measures. Finally, recent developments indicate that low-income countries are no longer at the losing end of the competition for FDI.

Der Abbau von Marktschranken - und damit auch die EU-Osterweiterung - bedingt eine Restrukturierung von Produktion und Beschäftigung in den beteiligten Ländern. Dieser Strukturwandel verursacht Anpassungskosten, die vor allen Dingen in Produktionszweigen und Beschäftigungsgruppen anfallen, die bei integrierten Märkten ihre internationale Wettbewerbsfähigkeit verlieren. Dennoch sind die verbreiteten Ängste vor der EU-Osterweiterung übertrieben. Dr. Peter Nunnenkamp, Institut für Weltwirtschaft an der Universität Kiel, zeigt in diesem Beitrag, dass ihre Auswirkungen auf die Direktinvestitionen der jetzigen EU-Länder in den Beitrittsländern schwächer ausfallen dürften, als vielfach erwartet wird. Zum einen ist der Höchststand der Direktinvestitionen überschritten, zum anderen handelt es sich häufig um zusätzliche Investitionen, die nicht auf Kosten der heimischen Exporte und Arbeitsplätze gehen

We construct comprehensive and comparable indices on the most relevant components of economic infrastructure. An unobserved components model is employed to cover the largest possible number of developing and developed countries over the period 1990-2010. We map major findings from the new indices on infrastructure and provide country rankings, which we also compare with subjective assessments of infrastructure in the World Economic Forum's Global Competitiveness Report. Finally, we exemplify possible applications related to trade and FDI. By overcoming several data limitations, our new global index can help assess the links between infrastructure and economic development more systematically.

Using count data on Indian joint ventures (JVs) and wholly owned subsidiaries (WOS), we present an empirical analysis of FDI-related ownership choices and their relation with host country characteristics and indicators of transaction costs. Our Negative Binomial regression models offer only weak support for the bargaining perspective, according to which JVs should be more likely if the host countries were particularly attractive in terms of market access or resource endowments. Geographical and cultural distance has ambiguous effects on the choice between JVs and WOS. The composition of FDI projects tends to shift toward WOS where investment risks are contained by bilateral treaties and better control of corruption.

We empirically assess the determinants of India's FDI outflows across a large sample of host countries in the 1996-2009 period. Based on gravity model specifications, we employ Poisson pseudo maximum likelihood (PPML) estimators. Major findings include: India's outward FDI is hardly affected by motives to access raw materials or superior technologies. Market-related factors appear to have dominated the location choices of Indian direct investors. A larger Indian diaspora in the host countries attracts more FDI. Finally, it seems that Indian direct investors are relatively resilient to weak institutions and economic instability in the host countries. However, we do not find robust evidence that India provides an alternative source of FDI for countries that traditional investors tend to avoid.

We address the question of whether foreign aid helps attract foreign direct investment (FDI). This could be achieved if well targeted aid removed critical impediments to higher FDI inflows. In particular, we test the hypothesis that aid for education is an effective means to increase FDI flows to host countries in Latin America where schooling and education appears to be inadequate from the viewpoint of foreign investors. We employ panel data techniques covering 21 Latin American countries over the period from 1984 to 2008. We find that aid for education has a statistically significant positive effect on FDI. This effect is robust to potential outliers, sample selection, alternative specifications and different estimation methods.

We analyze whether foreign direct investment (FDI) has contributed to the typically wide income gaps in five Latin American host countries. We perform country-specific and panel cointegration techniques to assess the long-run impact of inward FDI stocks on income inequality among households in Bolivia, Chile, Colombia, Mexico and Uruguay. The panel cointegration analysis reveals a significant and positive effect on income inequality. Furthermore, FDI contributed to widening income gaps in all individual sample countries, except for Uruguay. Our findings are robust to the choice of different estimation methods. There is no evidence for reverse causality.

Non-traditional source countries of FDI play an increasingly important role, notably in developing host countries. This raises the question of whether the determinants of FDI differ systematically between traditional and non-traditional source countries. We perform Logit and Poisson Pseudo Maximum Likelihood estimations drawing on UNCTAD's database on bilateral FDI flows, including various emerging and developing countries as sources of FDI outflows. We find that economic geography variables are more relevant for FDI from non-traditional sources, while non-traditional investors appear to be as risk adverse as traditional investors. Access to raw materials represents a less important driving force of FDI from non-traditional sources. The differences are less pronounced for other types of FDI.

This paper examines the long-run effect of FDI on health in developed countries. Using panel cointegration techniques, we find a significant and negative long-run effect.

This paper examines the relationship between foreign direct investment (FDI) and income inequality for a sample of ten European countries over the period 1980 to 2000. Using panel co-integration and causality techniques that are robust to omitted variables, slope heterogeneity, and endogenous regressors, we find that: (1) FDI has a positive short-run effect on income inequality in Europe, (2) the long-run effect of FDI on inequality, however, is negative on average, (3) long-run causality runs in both directions, suggesting that an increase in FDI reduces income inequality and, in turn, higher inequality leads to lower FDI inflows, and (4) there are large differences in the long-run effect of FDI on income inequality, with two countries (Ireland and Spain) exhibiting a positive relationship between FDI and income inequality.

We focus on investor-state dispute settlement provisions contained in various, though far from all, bilateral investment treaties as a possible determinant of BIT-related effects on bilateral FDI flows. Our estimation results prove to be sensitive to the specification of these provisions as well as the inclusion of transition countries in the sample. Stricter dispute settlement provisions do not necessarily result in higher FDI inflows so that the effectiveness of BITs as a credible commitment device remains elusive.

This study employs state-level panel data to explore the relationship between inward foreign direct investment (FDI) and income inequality in the United States. Using panel cointegration techniques that allow for cross-sectional heterogeneity, cross-sectional dependence, and endogenous regressors, we find that the short-run effects of FDI on income inequality are insignificant or weakly significant and negative. In the long run, however, FDI exerts a significant and robust negative effect on income inequality in the United States. This result for the United States as a whole does not imply that FDI narrows income gaps in the long run in each individual state. There is considerable heterogeneity in the long-run effects of FDI on income inequality across states, with some states (21 out of 48 cases) exhibiting a positive relationship between FDI in income inequality.

The previous literature provides a highly ambiguous picture on the impact of trade and investment agreements on FDI. Most empirical studies ignore the actual content of BITs and RTAs, treating them as 'black boxes', despite the diversity of investment provisions constituting the essence of these agreements. We overcome this serious limitation by analyzing the impact of modalities on the admission of FDI and dispute settlement mechanisms in both RTAs and BITs on bilateral FDI flows between 1978 and 2004. We find that FDI reacts positively to RTAs only if they offer liberal admission rules. Dispute settlement provisions play a minor role. While RTAs without strong investment provisions may even discourage FDI, the reactions to BITs are less discriminate with foreign investors responding favourably to the mere existence of BITs.

This paper estimates the aggregate productivity effects of Marshallian externalities generated by foreign direct investments (FDI) in the US. In contrast to earlier work, this paper puts special emphasis on controlling for Marshallian externalities and other intra- and inter-regional spillovers generated by domestic firms. The productivity effects of these externalities may, if not accounted for appropriately, be falsely attributed to FDI. This paper also deals with the potential endogeneity of FDI and the presence of spatial lags by employing a system generalized method of moments (GMM) estimator. We use a regional production function framework that models Marshallian externalities and other intra- and inter-regional spillovers explicitly as determinants of total factor productivity, and tests several empirical specifications of this model, using data for US states from 19772003. The results indicate that FDI does, in fact, generate positive externalities, while those from domestic firms are negative.

Foreign direct investment (FDI) has boomed in post-reform India. Moreover, the composition and type of FDI has changed considerably since India has opened up to world markets. This has fuelled high expectations that FDI may serve as a catalyst to higher economic growth. We assess the growth implications of FDI in India by subjecting industry-specific FDI and output data to Granger causality tests within a panel cointegration framework. It turns out that the growth effects of FDI vary widely across sectors. FDI stocks and output are mutually reinforcing in the manufacturing sector. In sharp contrast, any causal relationship is absent in the primary sector. Most strikingly, we find only transitory effects of FDI on output in the services sector, which attracted the bulk of FDI in the post-reform era. These differences in the FDI-growth relationship suggest that FDI is unlikely to work wonders in India if only remaining regulations were relaxed and still more industries opened up to FDI.

Singapore?s outward FDI is peculiar in important respects, even though it shares some characteristics with FDI undertaken by traditional investor countries. The focus of FDI in the manufacturing sector on lower-income Asian host countries suggests that the motivations and trade repercussions of Singapore's FDI differ from those of FDI undertaken by major industrialized countries. We apply basic gravity models in order to investigate the relationship between Singapore?s outward FDI and trade and, thereby, to assess the economic justification of concerns that outward FDI has adverse labour market implications. We do not find that Singapore's FDI has replaced exports. Yet, balance-of-payments effects differ considerably across manufacturing industries.

Conclusive evidence supporting the widely held view that developing countries should draw on foreign direct investment (FDI) to spur economic development is surprisingly hard to come by. We raise the proposition that results on the growth impact of FDI are ambiguous because highly aggregated FDI data, used in virtually all previous empirical studies, blur the differences between resourceseeking, market-seeking and efficiency-seeking FDI and ignore the compatibility of different types of FDI with economic conditions prevailing in the host country. Analysing US FDI stocks in major sectors and specific manufacturing industries in a large number of developing countries, we show that positive growth effects of FDI are anything but guaranteed. Rather, hostcountry and industry characteristics as well as the interplay between both sets of characteristics have an important say on the growth impact of FDI in developing countries.

This paper aims at overcoming several shortcomings of previous empirical studies on the relationship between IPR protection and FDI. First, FDI is analyzed on a sectorally and regionally disaggregated level. Second, we address the proposition that stronger IPR protection raises not only the quantity, but also the quality of FDI. Third, we check to which extent the relationship between IPR protection and FDI is affected by applying alternative measures of IPR protection. Our empirical findings support the hypothesis that the threat of an unauthorized use of intellectual-property-related assets and, thus, FDI depends on industry as well as host-country characteristics. Furthermore, stronger IPR protection tends to induce high-quality FDI.

There is a startling gap between, allegedly, globalization-induced changes in international competition for foreign direct investment (FDI) and recent empirical evidence on the relative importance of determinants of FDI in developing countries. We show that surprisingly little has changed since the late 1980s. Traditional market-related determinants are still dominant factors. Among non-traditional FDI determinants, only the availability of local skills has clearly gained importance. As concerns the interface between trade policy and FDI, we find that the tariff jumping motive for FDI had lost much of its relevance well before globalization became a hotly debated issue.

It is widely believed that the determinants of foreign direct investment have changed fundamentally in the process of globalization. We apply correlation and regression analyses in order to test this proposition for German direct investments in developing and transition economies. Indications are few that non-traditional determinants have become more important over time. We rather find that traditional determinants, notably the market size of host countries, continue to dominate German direct investments. Es wird häufig vermutet, dass sich die Bestimmungsgründe ausländischer Direktinvestitionen im Prozess der Globalisierung nachhaltig verändert haben. Diese These wird am Beispiel der deutschen Direktinvestitionen in Entwicklungs- und Reformländern korrelations- und regressionsanalytisch untersucht. Es finden sich kaum Belege dafür, dass nicht-traditionelle Determinanten im Zeitablauf an Bedeutung gewonnen haben. Vielmehr dominieren weiterhin traditionelle Faktoren wie die Marktgröße der Gastländer von deutschen Direktinvestitionen.

The new wave of regionalism in Latin America amounts to more than just old wine in new bottles. Yet the economic effects of regional integration are likely to fall short of Latin American expectations. The development of foreign direct investment in Latin America in the 1990s reveals that regional integration is neither necessary nor sufficient for improving locational attractiveness. Exports of Latin American integration schemes frequently continue to lack international competitiveness. Furthermore, it is uncertain whether Latin America's trade relations with Europe can be strengthened significantly by concluding interregional agreements on trade preferences. Die neue Welle des Regionalismus in Lateinamerika bietet mehr als alten Wein in neuen Schläuchen. Dennoch drohen hohe Erwartungen enttäuscht zu werden, die in die regionale Integration gesetzt werden. Die Entwicklung der ausländischen Direktinvestitionen in Lateinamerika in den neunziger Jahren zeigt, dass regionale Integration weder notwendig noch hinreichend ist, um attraktive Standortbedingungen zu schaffen. Den Exporten lateinamerikanischer Integrationsgemeinschaften mangelt es in vielen Fällen weiterhin an internationaler Wettbewerbsfähigkeit. Fraglich ist es auch, ob sich die Handelsbeziehungen mit Europa durch interregionale Präferenzabkommen nachhaltig intensivieren lassen.

Mercosur countries have witnessed a boom of foreign direct investment (FDI) inflows since the early 1990s. However, regional integration, viewed in isolation, was not sufficient for the subregion to regain its attractiveness to FDI. FDI growth in individual Mercosur countries was closely related to reform efforts on the national level.The pattern of EU FDI in the subregion reveals some significant changes, notably in terms of its major sources and its sectoral composition. Furthermore, EU investors pursued strategies that differed from those of other foreign investors. Yet, the character of EU FDI has essentially remained unchanged so far. Whether efficiency-seeking FDI by the EU in Mercosur will gain prominence in the future depends critically on Mercosur's trade policy.

Developing countries are constrained in financing current account deficits as real capital mobility is still far from perfect. At the same time, capital flows to these countries proved to be extremely volatile. The paper argues that the long-term problem of "too little" should not be confused with the short-term problem of "too volatile". The former is related to sovereign risk, which may be difficult to overcome. The latter could be kept within limits by financial restructuring towards relatively stable types of capital flows.

Der Beitrag analysiert die internationalen Produktionsverlagerungen und Investitionsverflechtungen in der Automobilindustrie, um die These zu überprüfen, dass es selbst bei der Herstellung relativ wissensund technologieintensiver Güter zu einem nachdrängenden Wettbewerb aus Ländern mit vergleichsweise niedrigem Pro-Kopf-Einkommen gekommen ist. Die Ergebnisse sprechen – insgesamt gesehen – eher dagegen, dass die Automobilproduktion an den traditionellen Standorten bereits in der Vergangenheit durch das Vordringen neuer Anbieter stark beeinträchtigt worden ist. Der "Wettbewerb von unten" dürfte in Zukunft aber intensiver werden.

Foreign direct investment (FDI) of Germany in Latin America reveals various peculiarities that may shape future investment relations. However, two major concerns are largely unfounded: - In contrast to widespread fears in Germany, FDI outflows are highly unlikely to have added to labor market problems. - Host country concerns that the Eastern enlargement of the EU may divert German FDI away from Latin America seem to be unjustified. German investors have responded relatively weakly to new investment opportunities in Latin America. Some of the traditional features of German FDI in this region, notably the predominant orientation towards large local markets, may work against closer investment relations in the era of globalization. Much depends on whether Latin American host countries succeed in improving international competitiveness in industries in which German FDI is concentrated.

Globalization improves the prospects for developing countries (DCs) to catch up economically with industrialized countries. Depending on economic policies with respect to openness and factor accumulation, globalization may increase capital and technology flows to DCs, thereby generating a higher rate of income growth than would be possible in a less integrated world economy. Nevertheless, many observers draw an overly pessimistic picture of the perspectives of DCs in the era of globalization, mainly for three reasons. First, DC membership in institutionalized regional integration schemes such as in Europe and North America is sometimes considered to be a necessary precondition for economic success. Second, a low level of interfirm technology cooperation between rich and poor countries is feared to delink DCs from technological progress. Third, a relatively high concentration of foreign direct investment flows on a few advanced DC hosts is said to limit the development prospects for the majority of DCs. The paper shows that such concerns are largely unfounded.

Latin America has regained attractiveness for foreign direct investment. However, it is still uncertain whether the recent boom of capital inflows is sustainable, and which countries are well prepared to benefit from the current trend towards globalized production. Economic policies pursued by Latin American governments are shown to be of overriding importance for explaining why the region as a whole lost ground vis-a-vis Asian competitors for foreign direct investment, and why some Latin American economies were more successful than others in restoring their locational attractiveness.