Jennifer L. Tobin

Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties

Bilateral Investment Treaty???s effects on FDI and the domestic business environment remain unexplored despite the proliferation of treaties over the past several years. This paper asks whether BITs stimulate FDI flows to host countries, and if the treaties have any impact on the environment for domestic private investment. We find a weak relationship between BITs and FDI. However, for risky countries, BITs attract greater amounts of FDI. We also find a weak relationship between BITs and the domestic investment environment. Thus, while BITs may not alter the domestic investment environment, they also may not be fulfilling their primary objective.

Funding Self-Sustaining Development: The Role of Aid, FDI and Government in Economic Success

This paper challenges a long-held development-policy assumption that aid and foreign-direct investment serve as substitutes or complements in accelerating the development of the worlds poorer countries. We show both theoretically and empirically that aid and FDI affect development very differently. Aid contributes powerfully to both economic growth and human development, and the higher the level of human capital in a country, the more aid contributes. By contrast, FDI at best has no effect on economic growth, and actually slows the rate of human development in less-developed countries. We find no evidence that the degree of democratic responsiveness in government conditions the effectiveness of either aid or FDI, though we do find that democracy independently increases human development in all but the most developed countries. Our results demonstrate that FDI and aid are not, and cannot, be substitutes in the development of the worlds poorer countries. Nor even can they be thought of as compliments - certainly not at mid to low levels of development. In the end, poor countries need democracy and aid, not FDI.

Take the Money and Run: The Determinants of Compliance with Aid Agreements

Conditions on aid agreements aim to increase aid effectiveness, and are, therefore, an important component of aid agreements. Yet little is known about why aid-recipient governments comply with these conditions. Some scholars have suggested a strategic-importance hypothesis: recipients comply when donors enforce conditions—and donors enforce conditions when recipients are not strategically important. However, there are many cases where strategically important countries comply with conditions and strategically unimportant countries fail to do so. We argue that to explain compliance, we must also understand how the desire to maximize revenue from major income sources, such as FDI and natural resource rents, changes the recipients incentive to comply. Using data on World Bank records of compliance from 1964 to 2010, we find strong support for our hypotheses even after accounting for different model specifications and potential endogeneity. Paradoxically, donors can secure compliance from recipients for reasons unrelated to the promise of additional aid.