My dissertation studies the effects of domestic political institutions on various aspects related to foreign direct investment (FDI), such as the business environment for foreign investors, investment disputes, and investment promotion strategies. The first paper in my dissertation, "The Effects of Federalism and Decentralization on the Business Environment for Foreign Direct Investment," is a study of how the distribution of authority between national and subnational governments affects the stability of the policy environment experienced by foreign investors. I propose that national governments have stronger incentives to provide a stable environment for FDI compared to subnational governments. This is because national governments are legally bound to the bilateral investment treaties (BITs) they sign and as such must potentially bear the costs of international investment disputes, even when the dispute in question arose from an action by a subnational government. As a result, countries where power is relatively concentrated in the national government will have more stable environments than countries with greater levels of subnational autonomy. I test this hypothesis using data released by the World Bank Enterprise Surveys, and find that firms operating in unitary and centralized countries are more likely to report predictable and consistent interpretation of laws compared to firms in federal and decentralized countries. I also find that the positive stabilizing effects of BITs are greater in unitary and centralized countries.
My second paper, "Can Rational Choice Explain Bilateral Investment Treaties? How Lack of Legal Capacity Affects BIT Signing," studies the effects of the legal capacity of a country on its ability to assess the consequences of international treaties it signs. The starting observation of this paper is that if federal and decentralized countries have less stable policy environments for foreign investors, they should be more likely to be respondents in international investment disputes, which should in turn make them less likely to sign BITs. What I actually find is that the effects of federalism and decentralization on signing BITs is dependent on the country's legal capacity. Countries with higher levels of legal capacity are more likely to be affected by their domestic political structure. The implication of this is that the legal capacity of a country influences its ability to evaluate its potential for non-compliance with BITs, which may cause countries that lack legal capacity to behave in a manner that does not seem strictly rational.
My third paper, "The Effects of Judicial Independence on Foreign Direct Investment and Investment Arbitration Laws," is motivated by the question of whether governments' investment promotion strategies function as complements or substitutes to domestic institutional quality. Specifically, I focus on the relationship between judicial independence of domestic courts, and national investment laws that provide for international arbitration between foreign investors and the government. I hypothesize that democratic countries with relatively low levels of judicial independence are more likely to use international arbitration as a substitute for their own weak domestic courts, whereas this effect will not be observed in autocratic countries. This is because foreign investors invest in democratic countries for different reasons than in autocratic countries: in democratic countries, investors seek high quality institutions (such as strong judicial independence), whereas in autocratic countries investors seek opportunities to collude with the government. I support this empirically by showing that amongst democratic countries, lower levels of judicial independence are associated with lower FDI inflows and higher likelihoods of passing national laws providing for international arbitration. These effects are, however, not observed in autocratic countries.