Peter Nunnenkamp

We study an underexplored research question, namely whether financial market development in both host and source countries has an effect on bilateral stocks of foreign direct investment (FDI) and, particularly, whether the effect of financial market development in one member of the country pair conditions the effect of financial market development in the other member. We estimate gravity‐type models in a global sample of 43 source and 137 host countries over the period 2001–12. We address reverse causality concerns by restricting the sample to observations where reverse causality, if existent, should be less relevant. Our major and robust findings are that bilateral FDI increases with better developed financial markets in both the host and the source country and that for developing host countries, financial market development in source and host countries functions as substitutes for each other.

Zusammenfassung: Die in vielen internationalen Investitionsabkommen festgeschriebenen Regeln zur Streitschlichtung zwischen ausländischen Investoren und den Gaststaaten stoßen in Politik und Öffentlichkeit auf zunehmenden Widerstand. Die Auswertung einer neueren Datenbank der UNCTAD über insgesamt 739 Streitfälle widerspricht aber der verbreiteten These, den ausländischen Investoren werde es leicht gemacht, willkürliche Forderungen auf Schadensersatz durchzusetzen, indem ihnen der Rückgriff auf internationale Schiedsgerichte ermöglicht werde. Der oftmals behauptete Pro-Investoren Bias internationaler Schiedsgerichte und eine Benachteiligung ärmerer Staaten mit schwacher Verhandlungsposition sind nicht nachweisbar. Es ist deshalb unwahrscheinlich, dass allein die Androhung von Klagen vor internationalen Schiedsgerichten die demokratisch legitimierten Regulierungsmöglichkeiten souveräner Staaten maßgeblich beschränkt.

Compelling empirical evidence on whether investor–state dispute settlement (ISDS) is systematically biased against poor respondent states hardly exists. We focus on disentangling the effects of the respondent state’s per-capita income and the strength of domestic rule of law on ISDS outcomes. We find that both higher income and stronger than ‘normal’ rule of law reduce the probability of investor wins in international arbitration of disputes.

This study examines the effects of greenfield foreign direct investment (FDI) and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 130 countries for the period from 2003 to 2011, the study specifically tests the compensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries.

Zusammenfassung: Im Rahmen der TTIP Verhandlungen stellt sich aktuell die Frage, warum hochentwickelte demokratische Staaten den Souveränitätsverzicht in Kauf nehmen sollten, der mit internationaler Streitschlichtung vor privaten Schiedsgerichten verbunden ist. Dieser Beitrag ordnet diese Frage in einen breiteren Kontext ein. Relativ glaubwürdige nationale Institutionen sollten es für demokratisch verfasste Gastländer ausländischer Direktinvestitionen weniger dringlich machen, sich international die Hände zu binden, um einen effektiven Schutz vor staatlicher Willkür zu bieten. Gleichwohl haben demokratische Gastländer bei der weltweiten Verbreitung internationaler Investitionsabkommen und bei deren strikterer Ausgestaltung eine wesentliche Rolle gespielt. Dieser Beitrag diskutiert die empirische Evidenz zum Zusammenhang zwischen Demokratie und der Häufigkeit von Investitionsabkommen sowie der darin enthaltenen Regeln zur Nichtdiskriminierung und Streitschlichtung. Es zeigt sich, dass es Ökonomen und Politikwissenschaftlern bisher kaum gelungen ist, den häufig gefundenen positiven Zusammenhang zwischen Demokratie und internationalen Investitionsabkommen schlüssig zu erklären.

We argue that donors could improve the effectiveness of foreign aid by pursuing complementary and coherent non‐aid policies. In particular, we hypothesize that aid has stronger growth effects if recipients receive more aid from donors who allow for (temporary) worker mobility and (more permanent) migration. We focus on overall remittances paid by the donor countries to proxy for worker mobility and migration. Our empirical results support the hypothesis that higher remittances paid by donor countries strengthen the growth effects of foreign aid.

We assess the targeting of foreign aid within recipient countries by employing Poisson estimations on the determinants of the World Bank's allocation of project aid at the district level in India. The evidence of needs‐based location choices is very weak as long as the poverty orientation of overall commitments is taken as the yardstick. It is only for some sectors that we find stronger indications of needs‐based allocation when combining sector‐specific commitments with corresponding measures of need. The evidence for a merit‐based allocation of World Bank aid is even weaker. We typically do not find evidence that aid allocation is affected by political patronage at the state or district level. However, the World Bank prefers districts where foreign direct investors may benefit from projects related to infrastructure.

Non-governmental organisations (NGOs) are widely believed to raise their flag in humanitarian hotspots with a strong media presence in order to attract higher private donations. We assess this hypothesis by comparing the changes in donations between US-based NGOs with and without aid operations in the four countries most affected by the tsunami in the Indian Ocean in 2004. Simple before-after comparisons tend to support the hypothesis that 'flying the flag' helps attract higher private donations. However, performing a difference-in-difference-in-differences (DDD) approach, we find only weak indications that private donors systematically and strongly preferred NGOs with operations in the region. Extended specifications of the baseline regressions reveal that our major findings are robust. NGO heterogeneity matters in some respects, but the DDD results hold when accounting for proxies of the NGOs' reputation and experience.