Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/130393 
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper No. 5766
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper scrutinizes the effects of investor-state dispute settlements (ISDS) and national treatment provisions in a two-period model where foreign investment is subject to domestic regulation and a holdup problem. It shows that ISDS can mitigate the holdup problem and increases aggregate welfare, but comes with additional regulatory distortions for the first period. A national treatment provision avoids these regulatory distortions, but implies entry distortions because it makes the holdup problem also apply to domestic firms. If the domestic regulatory framework applies to many domestic firms, a national treatment provision welfare-dominates ISDS.
Subjects: 
investor-state dispute settlement
national treatment provision
foreign direct investment
TTIP
TPP
regulation
JEL: 
F21
F23
F53
F55
Document Type: 
Working Paper
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