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Economics of international investment agreements

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  • Horn, Henrik
  • Tangerås, Thomas

Abstract

Nearly 2700 international investment agreements protect foreign investment against host country policies. This paper analyzes the design and implications of their contentious provisions regarding regulatory expropriations. It derives conditions under which “carve-out” compensation mechanisms, similar to those in actual agreements, solve underinvestment and overregulation problems and simultaneously distribute surplus according to countries' bargaining power. The paper examines a number of additional policy relevant issues, for instance, how to modify agreements when carve-out compensation is inefficient, whether agreements cause “regulatory chill,” and the different motives and distributional consequences of North-South versus North-North agreements.

Suggested Citation

  • Horn, Henrik & Tangerås, Thomas, 2021. "Economics of international investment agreements," Journal of International Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:inecon:v:131:y:2021:i:c:s0022199621000106
    DOI: 10.1016/j.jinteco.2021.103433
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    References listed on IDEAS

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    1. Guttorm Schjelderup & Frank Stähler, 2021. "Investor‐state dispute settlement and multinational firm behavior," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 1013-1024, September.
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    Cited by:

    1. Horn, Henrik, 2022. "Investment Treaty Reform when Regulatory Chill Causes Global Warming," Working Paper Series 1450, Research Institute of Industrial Economics, revised 23 Apr 2024.
    2. Holmberg, Pär & Tangerås, Thomas, 2021. "Sweden's Energy Investment Challenge," Working Paper Series 1383, Research Institute of Industrial Economics.

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    More about this item

    Keywords

    Carve-out compensation; Foreign investment; International investment agreement; Regulatory chill; Regulatory expropriation;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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