Essays on trade and investment treaties, foreign direct investments, and domestic institutions

This work is a collection of essays that address the linkages of domestic and international policies and institutions with changing patterns of production, trade, and investment. The first essay claims that the formation of preferential trading agreements (PTAs) is endogenous. It shows that additional insights on the formation of PTAs can be gained from disaggregating PTAs by country-pair type and period. Countries generally choose to form PTAs with countries that are geographically proximate to them and with which they have a history of trading, but more recent trading relationship is important. PTAs formed in recent years are found to have more economic rather than political motivation compared to earlier ones. Furthermore, using a simple model, this essay demonstrates that trade protection is not a necessary outcome with international division of labor and that the latter has influenced the formation of North-South PTAs.;The second essay reconciles the opposing views on the impact of labor market flexibility on foreign direct investments. Labor market regulations and standards decrease FDI inflows through the cost channel, but increase FDI inflows through the productivity channel. Using disaggregated labor market indexes and allowing for a non-linear relationship between labor market flexibility and FDI inflows revealed that some degree of labor market standards and regulations may be attractive for foreign investors. Results likewise suggest that foreign investors from different countries and in different sectors respond differently to different aspects of labor market flexibility.;The third essay argues that North-South Bilateral Investment Treaties (BITs) can have positive spillover effects for developing countries. In particular, BITs can signal social and political stability, good rule of law and property rights in developing countries---with the unintended benefit of attracting FDI even from countries that are not a party to the BIT. Results reveal that BITs of developing countries with the United States, the United Kingdom, France, and Germany have potential signaling effects.