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UBC Theses and Dissertations

The impact of investor-state arbitrations on foreign direct investment and domestic public opinion : evidence from FDI flows, elite interviews and a survey experiment Burzo, Stefano


Foreign Direct Investment (FDI) is among the most studied phenomena in international economic relations and presents a dilemma: it can drive economic growth in recipient countries, but it may tempt governments to expropriate foreign investors to redistribute wealth. Scholars noted that when countries expropriate, they may suffer damages to their reputation as safe investment destinations, thereby discouraging future FDI, especially when investors lodge complaints at international institutions. In the dissertation, I leverage a multi-method approach to examine the economic and political consequences of investor-state disputes on FDI and domestic public opinion. I apply three different research methods to three different sources of evidence: bilateral FDI flows, original elite interviews and a survey experiment. Two chapters focus on reputational theories of FDI, which posit that investment arbitrations generate reputational cues which investors use for locational decisions. Most studies assume that arbitrations damage the trustworthiness of the recipient country, regardless of the outcome. Complementing the literature, in Chapter 1 I argue that when countries settle a dispute their reputation can improve, thereby influencing FDI, and present results from a statistical analysis of FDI flows. In Chapter 2, I leverage process-level evidence from original interviews to test and explore causal steps and observable implications derived from the assumptions of existing reputational theories. FDI can have salient economic and political consequences for voters, beyond governments and investors. In Chapter 3, I identify the factors influencing public preferences for government behavior in investor-state disputes and empirically examine them in a survey experiment fielded in the United States. The results show that citizens are more likely to support their government litigating the dispute (rather than settling it) when there were prior disputes with companies from the same partner country, or when the partner country is authoritarian. Other economic factors seem to have a lesser influence on public support, including concerns about jobs or the amount of investment. The dissertation contributes to the empirical literature on FDI, investment treaties and dispute settlement, and their economic and political impact. The findings can inform policy discussions on economic treaties, the international investment regime, and transparency in international investment practices.

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