The Effect of Tax and Investment Treaties on Bilateral FDI Flows to Transition Economies

Abstract

Abstract This chapter empirically examines the effect of bilateral investment treaties (BITs) and double taxation treaties (DTTs) on foreign direct investment. This chapter is structured as follows: firstly it describes bilateral investment and tax treaties, and reviews existing empirical studies on both BITs and DTTs. It then describes the methodology and data, and discusses the estimation technique and results, and conclusions. The chapter shows that transition countries that have BITs with developed countries receive more FDI inflows from these countries. It also provides evidence that BITs function to some extent as substitutes for institutional quality. There was no robust effect of tax treaties on FDI.

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