Corporate Taxation and Bilateral FDI with Threshold Barriers / Assaf Razin, Yona Rubinstein, Efraim Sadka.

Format:

Book

Author/Creator:

Razin, Assaf.

Contributor:

National Bureau of Economic Research.

Rubinstein, Yona.

Sadka, Efraim.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11196.

NBER working paper series no. w11196

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

The paper brings out the special mechanism through which taxes influence bilateral FDI, when investment decisions are two-fold in the presence of fixed setup flows costs. For each pair of source-host countries, there is a set of factors determining whether aggregate FDI flows will occur at all, and a different set of factors determimnig the volume of FDI flows (provided that they occur). We demonstrate that the notion that the mere international tax differetials are a key factor behind the direction and magnitude of FDI flows is too simple. We argue that the source country tax rate works primarely on the selection process, whereas the host-country tax rate affect mainly the magnitude of the FDI, once they occur. We analyze international panel data with 24 OECD countries over the period 1981-1998 by the Heckman selection method to bring evidence in support of this argument.

Notes:

Print version record

March 2005.