Working Paper No. 1140

Economics and Politics of International Investment Agreements

Published: November 18, 2016Pages: 66Keywords: Foreign direct investment; Expropriation; International investment agreements; Regulatory chillJEL-codes: F21; F23; F53; K33

Economics and Politics of International Investment Agreements Henrik Horn and Thomas Tangerås


This paper investigates the design and implications of international investment agreements. These are ubiquitous, potent and heavily criticized state-to-state treaties that protect foreign investment against host country policies. We show that 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 ‡ows. The bene…ts from agreements between developed countries accrue to foreign investors at the expense of the rest of society, but this is not the case for agreements between developed and developing countries.

Henrik Horn

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Ph: +46 8 665 4540
henrik.horn@ifn.se

Thomas Tangerås

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Ph: +46 8 665 4526
Mob: +46 70 727 5448
thomas.tangeras@ifn.se

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

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The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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