International agreements boost investment, but distance matters for emerging markets.
International economic agreements like bilateral investment treaties and preferential trade agreements impact how firms from emerging economies invest. These agreements increase foreign direct investment, but their effects depend on the distance between countries. Bilateral investment treaties help reduce uncertainty and costs for investing in distant markets, while preferential trade agreements are less effective the farther away the market is. This was found through a study of 700 firms from Brazil, India, South Korea, and South Africa.