Total Protection: A New Measure of the Impact of Government Interventions on Investment Profitability

Stephen Guisinger
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Stephen Guisinger: University of Texas at Dallas

Journal of International Business Studies, 1989, vol. 20, issue 2, 280-295

Abstract: Host country interventions in goods markets (e.g., tariffs and quotas) and factor markets (e.g., tax holidays and training grants for workers) are recognized as having substantial effects on the profitability of foreign direct investments. This study proposes two new comprehensive measures—total protection and an internationalized version of the marginal effective rate of taxation—that incorporate all government interventions in a single, easily understood common denominator readily applicable to empirical research. Empirical estimates of the total protection measure for Europe suggest that for new investments government interventions in factor market increase profitability more than trade interventions.© 1989 JIBS. Journal of International Business Studies (1989) 20, 280–295

Date: 1989
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