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Working Papers

A Liberal Reward?: How Do State Foreign Policy Preferences Condition Investors’ Perception of BITs Compliance? (Under Review)

Why have some states withdrawn from bilateral investment treaties (BITs) after being challenged with an investor-state claim while other states in a similar situation have continued to participate? In this paper, I argue that this discrepancy is attributable to the disproportionate accrual of benefits of BITs depending on the host country’s systematic foreign policy alignment. When investors believe that a country generally abides by the rules and norms of the liberal international system, they view BITs as credible commitments that states will refrain from expropriation. However, investors are more suspicious when countries who do not typically accept the rules and norms of the liberal international system ratify BITs given that these countries may do so merely as a window dressing, as seen in other issue areas such as human rights. I find strong quantitative evidence for this hypothesis. My results show that BITs increase investment flows only in countries who typically accept liberal proposals in the UN General Assembly. Moreover, pending or settled investor claims lead to reductions in investments only in those countries that typically vote in an illiberal manner. These illiberal countries experience only the negative side of the investment system: dispute claims provide negative information about an investment climate that leads to the perception that the signing of the BIT is an empty signal. 

The Political Economy of International Reserve Accumulation: Self-Insurance or Mercantilism?
(With Phillip Lipscy)

Why do countries accumulate international reserves?  The massive accumulation of reserves by many Asian countries in recent years has been associated with global imbalances such as the US current account deficit and perverse capital flows from developing to developed countries.  However, the reasons for this reserve accumulation remain contentious.  In this paper, we evaluate two leading hypotheses about Asian reserve accumulation.  First, reserve accumulation may be a consequence of Asian countries pursuing export-led development policies that deliberately undervalue their currencies.  Second, countries underrepresented in the IMF may pursue precautionary reserve accumulation as a means of self-insurance.  Using the synthetic control method, we examine whether reserve accumulation accelerated for countries when: 1. they transitioned to export oriented industrialization, and 2. when they experienced political or economic events that affected their relationship with the IMF.  The results call into question the mercantilist account and suggest reserve accumulation is primarily motivated by precautionary concerns. 

Do BITs Attract Foreign Investment?: Measuring FDI as Firm Investment Decisions

While many studies have evaluated the effect of BITs on FDI, they have relied on measures aggregated to the country-year level, This has made it impossible to study FDI at the firm level, but perhaps more importantly, has produced inferential challenges even for testing of structural theories with implications at the country level. In this paper, we employ a novel dataset of Korean firms' foreign investments (measured at the level of affiliate-parent-country-year) to investigate a persistent question in the IPE literature on FDI: do BITs increase bilateral investment levels? In so doing, we are able to overcome many of the inferential challenges due to omitted variable bias that have dogged the literature on FDI as well as to identify heterogeneous treatment effects on firm investment choices according to, for example, productivity. We present some preliminary evidence that consistent with the expectations of the theory of heterogeneous firms, the positive effect of BITs on investment is primarily felt among more-productive firms.. 

Why Arbitrate?: The Role of Home State Economic Institution in Investor-State Arbitration

Why do investors from certain countries exhibit a higher tendency to file investor-state arbitrations compared to investors from other countries? Existing studies have not addressed this question due to the inability to identify a full universe of potential arbitration cases. In this paper, I create an original data set that allows for the study of investment, expropriation, and arbitration initiation stages to account for the selection process into investor-state arbitration. I show that a firm’s country of origin (home country) plays an important role in that firm’s usage of ISDS, as the home country’s state-to-state relations and state-business ties both influence the probability of expropriation and potential subsequent arbitration. Investors from countries with strong state-firm ties are less likely to experience expropriation when they invest in host states that share strong common interests with their home state. This is likely a result of the host government’s reluctance to make decisions (e.g. expropriation) that would damage its relationship with the home government given potential benefits from future cooperation. Moreover, once expropriation takes place, investors from countries with strong state-business ties are less likely to use ISDS to resolve disputes if home and host states hold strong common interests. The findings of this research imply that MNCs are not stateless entities unrestrained by home characteristics. Moreover, this study suggests that ISDS may not “depoliticize” investment disputes as believed by many.

When Do Workers Align with Company Interests?: Evidence from Survey Experiments in South Kore

I am currently working on a related project that builds on the 2022 International Organization article to further refine the theory of firm-based individual preference formation. While my co-author and I showed in the 2022 paper that there is a correlation between firm interests and employee preferences, our research had two limitations. First, because employees self-select into companies, the observed relationship between firms and individual trade opinions may be driven by unobserved individual characteristics. For example, productive individuals may be more likely to work for productive companies. Second, we have not investigated the mechanism underlying the link between employee and firm opinions, and thus are unable to identify the conditions under which firms are most likely to affect individual opinions. To address these limitations, I conducted a survey experiment on a sample of 1,500 individuals employed by companies in South Korea. The results demonstrate that firm interests do indeed shape the trade preferences of their employees. However, the alignment between employers and employees is stronger for policies that could harm the employer, as opposed to policies that could help the employer. This may be the result of loss aversion. In addition, I argue and show that a company's profit-sharing program is a key factor that explains the impact of firm interests on individual trade preferences. By anticipating that their economic welfare is linked to their firm's performance through profit-sharing programs, employees are more likely to support policies that benefit the firm and oppose policies that harm the firm. While this study focuses on trade policies, it also holds implications for the role of firms in shaping individual opinions in other policy areas.

When Do Consumers Support Protectionist Demands by Interest Groups?: Evidence from Korea and the United States

When do members of the public align with protectionist interest groups, even at the expense of their own consumer interests? The prevailing wisdom in trade literature suggests that while individuals tend to prefer free trade due to increased access to inexpensive foreign imports, collective action problems make it difficult for them to organize against protectionist movements. However, real-world examples suggest that the public may support protectionist interests of specialized groups under certain circumstances. For example, public opinion surveys conducted in industrialized economies consistently reveal that approximately half of the respondents are willing to accept increased tariffs to aid the suffering agricultural industry. In this study, my co-author Sujeong Shim (NYU Abu Dhabi) and I investigate the conditions under which individuals are willing to prioritize the interests of protectionist groups over their own materialistic interests as consumers. Our survey results suggest that individuals become more supportive of protectionism when (1) they are exposed to information linking their own economic interests to those of the protectionist group and (2) they are primed to feel sympathy towards the same group. Our study highlights that consumer benefits may not be the dominant lens through which individuals in non-tradeable sectors view trade, challenging the prevailing assumption that citizens favor free trade.

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