The international service trade effects of bilateral investment treaties

This paper examines the impact of the bilateral investment treaties (BITs) on a large dataset of service trade using recently developed Poisson pseudo-maximum likelihood (PPML) estimator regression models with multiple high-dimensional fixed effects to estimate the structural gravity equations. The model in this paper theoretically demonstrates that BITs reduce service trade from foreign direct investment (FDI) source countries by decreasing the additional variable costs of operating a foreign affiliate. This paper also empirically confirms that BITs decrease service exports from developed to developing economies through analysing a comprehensive WTO-OECD Balanced Trade in Services Data from 1995 to 2006.

Automated summary

This paper examines the impact of BITs on service trade and demonstrates that BITs can reduce service trade costs and decrease service exports through both theoretical analysis and empirical evidence.