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Title:The economics of a multilateral investment agreement PDF Logo
Authors:Che, Jiahua
Willmann, Gerald
Issue Date:2009
Series/Report no.:CESifo working paper 2562
Abstract:This paper models a multilateral agreement on investment (MAI) as a coordination device. Multinational enterprises can invest in any number of countries. Without a multilateral investment agreement, expropriation triggers an investment stop by the single MNE. Under a multilateral agreement, expropriation leads to a joint reaction by all MNEs. Switching to such a regime increases worldwide FDI and raises the world interest rate. Distinguishing three groups of countries, we show that industrialized countries experience an outflow of capital but benefit overall due to an increase in repatriated profits. Middle income countries are likely to gain from increased inward FDI, whereas least developed countries lose because they receive less FDI. Our results explain the stylized fact that a multilateral investment agreement was opposed by least developed nations and certain groups in rich countries.
Subjects:Multilateral investment agreement
FDI
trade policy
JEL:F13
F21
F23
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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