Bilateral investment treaty, technological intensity, and international trade

This paper examines the impact of bilateral investment treaties (BITs) and technological intensity on exports. It incorporates technological intensity and firm heterogeneity into a simplified static, partial equilibrium model, proposing that BITs increase the extensive margin of exports and have a greater impact in technologically underdeveloped sectors. The empirical analysis utilizes a comprehensive dataset covering 191 countries and 22 sectors, employing Poisson pseudo maximum likelihood (PPML) estimation with various fixed effects to estimate the gravity equations. It provides robust evidence that BITs primarily affect exports by increasing the extensive margin of exports. Furthermore, in sectors with the lowest average technological intensity, an additional BIT is estimated to increase the extensive margin by approximately \(18.6\mathrm{\%}\) $18.6\%$ , while in sectors with the highest average technological intensity, the increase is estimated to be only \(8.1\mathrm{\%}\) $8.1\%$ .