INVESTOR-STATE DISPUTES: A BIT OF INFORMATION FOR INVESTORS

This thesis researches the effects of bilateral investment treaties (BITs) and investor-state disputes on foreign direct investment (FDI) in non-OECD countries. In particular, it focusses on the question whether the effect of investor-state disputes on FDI is different between countries depending on their property right protection index. This thesis contributes to the relatively limited research on the effect of investor-state disputes on FDI and it is the first to research the differential effect of investor-state disputes on FDI depending on investment climate. A dataset on BITs and investor-state disputes is manually constructed for the purposes of this thesis. The final sample includes 84 countries over the period 1970 to 2016. The hypotheses are tested using generalized least squares and two stage least squares, with the average number of BITs signed by neighboring states used as an instrument. No convincing evidence is found that BITs have a positive effect on FDI. The most important finding is that the effect of investor-state disputes differs between countries with a different score on the property right index. Sensitivity analyses confirm this finding, it remains uncertain whether countries with a low or a high property right index are more negatively affected by investor-state disputes. Name