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Credibility, preferences, and bilateral investment treaties

Cited 3 time in Web of Science Cited 3 time in Scopus
Authors

Cho, Seok-ju; Kim, Yong Kyun; Lee, Cheol-Sung

Issue Date
2016-03
Publisher
SPRINGER
Citation
REVIEW OF INTERNATIONAL ORGANIZATIONS, Vol.11 No.1, pp.25-58
Abstract
When is a commitment mechanism employed as a solution to a time-inconsistency problem? This article provides a nuanced answer to this question by studying bilateral investment treaties (BITs). We develop a game theoretic model of BIT signing in which the government of a capital-importing country and an investor from a capital-exporting country strategically interact. The model predicts that, on the one hand, when host states highly value foreign direct investment (FDI), the likelihood of BITs increases as their judicial institutions lack credibility. On the other hand, when their preferences for FDI are only modest, the likelihood of BITs increases as their judicial institutions become more credible. We employ Cox proportional hazard models to test our hypotheses, and the results largely support our theory. Our findings have broad implications for the large literature on credible commitment, which has paid insufficient attention to the interplay between preferences and credibility.
ISSN
1559-7431
URI
https://hdl.handle.net/10371/203281
DOI
https://doi.org/10.1007/s11558-015-9218-8
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  • College of Social Sciences
  • Department of Political Science and International Relations
Research Area Comparative, Comparative Politics, International Political Economy, Southeast Asia

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