Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121143
Authors: 
Bruhn, Dominique
Year of Publication: 
2015
Series/Report no.: 
FIW Working Paper 142
Abstract: 
Against the background of a changing landscape of trade and investment governance in the 21st century, characterised by the proliferation of deep preferential trade agreements (PTAs), this paper econometrically tests the importance of global value chain trade and regulatory differences in explaining the likelihood of a country pair to include an (enforceable) investment provision in the PTA. The spatial probit analysis, based on Bayesian Monte Carlo Markov Chain simulation, reveals that higher production network trade and strongly differing legal frameworks are indeed associated with a higher likelihood of including (enforceable) investment provisions. This is true even when controlling for interdependence between countries and conducting a variety of sensitivity checks, underscoring the importance of deep integration in the context of global value chains. However, when excluding EU countries from the sample, investment coverage and enforceability is rather driven by positive spatial interdependence between countries, raising the question whether the focus on global value chain trade and regulatory differences is something characteristic of EU trade policy making.
Subjects: 
preferential trade agreement
investment
global value chain
production network trade
spatial probit
Bayesian econometrics
JEL: 
F13
F14
F15
Document Type: 
Working Paper

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