BITs and FDI Revisited: A Matching Approach

Abstract

Bilateral Investment Treaties (BITs) are legal agreements between two governments with the goal of protecting and attracting FDI. However, existing research on whether BITs fulfill their intended purpose remains mixed. I argue that the empirical analysis of BITs must statistically account for the selection into BIT signing to identify the effects of BITs on FDI. Using a matching approach, I find that BITs do attract FDI.