Population Aging, Foreign Direct Investment, and Tax Competition
Ronald Davies () and
Robert Reed ()
University of Oregon Economics Department Working Papers from University of Oregon Economics Department
This paper studies the role of population aging for foreign direct investment and the strategic taxation of capital. Importantly, our theoretical model suggests that the labor market implications of aging differ from the financial market aspects. While population aging may be associated with a lower capital stock in the home country and less foreign direct investment, the effects through the labor market and employment tend to generate larger outbound capital flows. To quantify these aspects, we conduct regression analysis to empirically document how population aging affects FDI. To be specific, we use data on both US inbound and outbound FDI. Notably, the estimates between the US and other developed countries conform quite closely to the predictions of our theory. We conclude by studying the strategic taxation of capital. In particular, we examine this issue in light of the fiscal burden associated with older populations. In contrast to previous work on tax competition, we incorporate that old-age transfer programs are generally funded by labor taxes. In this manner, our framework introduces new insights regarding the incentives for governments to restrict capital outflows since doing so increases the labor income tax base used for intergenerational transfers.
Keywords: Population Aging; Fiscal Policy; Foreign Direct Investment (search for similar items in EconPapers)
JEL-codes: F20 H87 (search for similar items in EconPapers)
Date: 2003-04-10, Revised 2003-06-10
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://economics.uoregon.edu/papers/UO-2006-16_Davies_Aging.pdf [301 Moved Permanently]--> https://economics.uoregon.edu/papers/UO-2006-16_Davies_Aging.pdf)
Working Paper: Population Aging, Foreign Direct Investment, and Tax Competition (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ore:uoecwp:2006-16
Access Statistics for this paper
More papers in University of Oregon Economics Department Working Papers from University of Oregon Economics Department Contact information at EDIRC.
Series data maintained by Bill Harbaugh ().