Impact of International Investment Agreements on Japanese FDI: A firm-level analysis

Author Name URATA Shujiro (Faculty Fellow, RIETI) / BAEK Youngmin (Fukuyama University)
Creation Date/NO. April 2022 22-E-038
Research Project Globalization and the Japanese Economy: Firm Adjustment and Global Trade Governance
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In this study, we examine the impact of Japan’s international investment agreements (IIAs) on the locational choice of Japanese firms’ foreign direct investment (FDI) by considering the quality of IIAs. We estimate the conditional logit model covering 94 host countries, 16 manufacturing sectors, and 12 non-manufacturing sectors from 2000 to 2019. We found that the presence of IIAs, particularly comprehensive and high-level ones, has a positive impact on Japan’s FDI. On the contrary, the past incidence of investor–state disputes has a negative impact. These effects are found to be particularly strong for FDI by small and medium-sized enterprises. High regulatory quality is found to attract FDI, whereas the positive impact of IIAs in attracting FDI is strong in countries with low regulatory quality.