() and Frank Stähler
Guttorm Schjelderup: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Frank Stähler: School of Business and Economics, University of Tübingen, Postal: University of Tübingen, School of Business and Economics, Mohlstr. 36 (V4), D-72074 Tübingen, Germany
Abstract: Investor-state dispute settlements (ISDS) were supposed to become an integral part of multilateral trade and investment agreements although the partner countries of these deals do not suffer from substantial institutional weakness. This paper shows why multinational firms lobby for ISDS also in this environment beyond the potential compensation an ISDS provision may offer. ISDS makes them more aggressive by increasing cost-reducing investment. Therefore, potential compensations to a foreign investor do not imply a zero-sum game, and competition with a domestic firm does not necessarily help but may imply even more excessive investment.
17 pages, March 30, 2017
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