Scandinavian Working Papers in Economics
Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science
No 2020/9: Investor-State Dispute Settlement and Multinational Firm Behavior
Guttorm Schjelderup () and Frank Stähler ()
Additional contact information
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, Nauklerstr. 47, D-72074 Tübingen, Germany
Abstract: This paper shows that Investor-State Dispute Settlements (ISDS) makes multinational firms more aggressive by increasing cost-reducing investments with the aim to enlarge the potential compensation an ISDS provision may offer. While a larger investment reduces the market distortion, it will also make potential compensations larger. Consequently, potential compensations to a foreign investor do not imply a zero-sum game. ISDS may decrease domestic welfare, in particular if the investment leads to the establishment of an export platform, and we find that even global welfare may decline.
Keywords: Investor-State Dispute Settlement; Multinational Enterprises; Foreign Direct Investment; TTIP; TPP
23 pages, August 28, 2020
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