Buthe and Milner (2008)- The Politics of Foreign Direct Investment into Developing Countries-Increas

Buthe and Milner - The Politics of Foreign Direct Investment into Developing Countries Increasing FDI through International Trade Agreements By Tim

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The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements? By: Tim Buthe and Helen V. Milner (2008) Büthe, Tim, and Helen V. Milner. 2008. “The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements?” American Journal of Political Science. 52(4): 741-762. 1. Question: a. What explains the variation and timing of FDI inflows into developing countries? Focus on international institutions (trade agreements GATT/WTO) and preferential trade agreements (PTAs) 2. Novel Approach: a. Introduce theory and methods concerning International trade agreements and their affect on FDI inflows (supposedly the first study of its kind) 3. Theoretical Perspective: Neolib 4. Theory: a. Economic Institutions such as GATT/WTO and PTAs create incentives for states who have joined not to renege on their promises because they will be punished by foreign investors. This in turn means that when they do join, their membership can be seen as a credible signal of their intention to pursue liberal economic policies and protect FDI assets 5. Methods: Pooled Estimation Time-series OLS with country fixed-effects with trend corrected data to deal with heteroskedasticity and autocorrelation (because the trend of FDI trends upward over time) 6. Findings: a. Membership in institutions such as WTO/GATT and PTAs lead to greater FDI inflows under many different models 7. Questions/Critiques: a. GATT/WTO MEMBERSHIP: Dummy / 1 if FORMAL member ( Could this be made stronger with Tomz, Goldstein, and Rivers’ 2007 dataset of formal and informal membership of GATT / Would the findings be weaker?) Abstract: The flow of FDI into developing countries varies greatly across countries and over time. The political factors that affect these flows are not well understood. Focusing on the relationship between trade and investment, we argue that international trade agreements-GATT/WTO and preferential trade agreements (PTAs)-provide mechanisms
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for making commitments to foreign investors about the treatments of their assets, thus reassuring investors and increasing investment. These international commitments are more credible than domestic policy choices, because reneging on them is more costly. Statistical analyses for 122 developing countries from 1970 to 2000 support this
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This note was uploaded on 02/03/2012 for the course POLS 5308 taught by Professor Biglaiser during the Spring '11 term at Texas Tech.

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Buthe and Milner - The Politics of Foreign Direct Investment into Developing Countries Increasing FDI through International Trade Agreements By Tim

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