Attracting FDI: Are Other Government Policies More Important than Taxation in Attracting FDI?

Timothy Goodspeed (), Jorge Martinez-Vazquez () and Li Zhang
Additional contact information
Li Zhang: Georgia State University

No 414, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics

Abstract: This paper attempts to broaden the existing empirical literature on foreign direct investment by incorporating government expenditures (both investment in infrastructure and consumption) as well as tax, classical location factors, institutional factors that may hinder business investment (such as corruption), and agglomeration effects. We investigate the determinants of FDI inflows in two unbalanced panel data sets of 47 countries from 1995-2002 and 37 countries from 1996-2002. We use fixed country and year effects and examine different infrastructure measures. The evidence indicates that lower taxes, lower corruption, and better infrastructure attract FDI. Government consumption expenditures negatively impact FDI inflows. The magnitude of the response of FDI to our investment in infrastructure is similar to that of corruption and taxes in elasticity terms.

Keywords: FDI; Infrastructure; Determinants of FDI; Corruption; Taxes (search for similar items in EconPapers)
JEL-codes: H O (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dev and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://econ.hunter.cuny.edu/wp-content/uploads/sit ... /HunterEconWP414.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:htr:hcecon:414

Access Statistics for this paper

More papers in Economics Working Paper Archive at Hunter College from Hunter College Department of Economics 695 Park Avenue, New York, NY 10065. Contact information at EDIRC.
Bibliographic data for series maintained by Jonathan Conning ().