External publications

Economic impacts of an Investment Facilitation for Development Agreement

in: Axel Berger / Manjiao Chi (eds.), The making of an International Investment Facilitation Framework: legal, political and economic perspectives: Cambridge University Press, 123-147

ISBN: 978-1-00-944409-5
DOI: https://doi.org/10.1017/9781009444095.009
Open access

We quantify the impacts of a potential Investment Facilitation for Development (IFD) Agreement under negotiation at the World Trade Organization (WTO). The analysis is based on an innovative multiregion general equilibrium simulation model including bilateral representative firms. Consideration is given to foreign direct investment (FDI) and monopolistic competition. The model shows empirically relevant gains associated with removal of investment barriers in the form of transaction costs faced by foreign investors. The expected global welfare gains range between 0.56% and 1.74% depending on the depth of a potential IFD Agreement. The benefits are concentrated among the participants of the agreement with the highest welfare increase for the low-income and middle-income countries. Notable spillovers accrue to nonparticipants, which can be further increased by joining the agreement. Our results contribute to the relatively scarce research on investment facilitation and provide policymakers with information on the potential effects of the negotiated IFD Agreement.

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