January 2008

Explaining Pareto-Inefficient International Cooperation Using Argentina’s Bilateral Investment Treaties

Typical explanations for why developing countries engage in welfare-reducing international economic cooperation focus on how international pressures can turn cooperation into a country's least-worst option. Using Argentina’s bilateral investment treaties as a case study, this paper finds that domestic politics also inﬂuence whether cooperation will be pursued. Speciﬁcally, welfare-reducing cooperation can result when economic elites are able to exert signiﬁcant leverage over the state. In these circumstances, a high discount rate will be used to assess the short-term beneﬁts and long-term costs of cooperation, in which case a country may willingly curtail their ability to develop using industrial policy.

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