Determinants of foreign direct investment flows to developing countries: the role of international investment agreements

Abstract

Given that foreign direct investment (FDI) can create important benefi ts for developing countries (see Chapter 3), it is crucial to understand what determines the fl ows of FDI to the developing world and how developing country policymakers can infl uence these determinants. There is a large literature on this subject, with reviews by Agarwal, Schneider and Frey, and more recently by Chakrabarti and Blonigen.1 In this chapter, we fi rst review this literature and summarize key conclusions from conceptual and empirical studies. In the second part of the chapter we analyse in more detail the impact of investment treaties on FDI. This issue has received less attention so far in the literature and is increasingly important.