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Thomas Tangerås presented at the American Economic Association's Annual meeting.

2020-01-07

Thomas Tangerås and Henrik Horn, portrait photo by Karl Gabor.

Thomas Tangerås presented his and Henrik Horn’s joint paper ”Economics of International Investment Agreements” at the American Economic Association’s annual meeting in San Diego.

They have developed a theory of how to understand state-to-state investment agreements. Internationally, approximately 2,300 such agreements are protecting foreign investment against public intervention by the host countries. Sweden, too, has a large number of such agreements.  The agreements have recently become very controversial. For example, the criticism of both the EU-US TTIP agreement and the CETA agreement between the EU and Canada, was largely concerned with investment protection. A main source of contention is that these agreements allow private investors to pursue legal proceedings against individual countries outside the domestic legal systems. In their paper, Henrik Horn and Thomas Tangerås show that the simple conflict resolution mechanisms contained in most agreements can provide sufficient investment protection without distorting the incentives of countries to implement desirable environmental measures and measures in other areas. Properly designed, therefore, investment protection can be welfare-enhancing. The authors also show that the gains from agreements between developed countries are likely to accrue to foreign investors, at the expense of the rest of society.

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