Incentive Targeting, Influence Peddling, and Foreign Direct Investment

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Incentive Targeting, Influence Peddling, and Foreign Direct Investment

Author Info

Kelly D. Edmiston ()
Shannon Mudd ()
Neven T. Valev ()

Additional information is available for the following registered author(s):

Kelly Dane Edmiston

Abstract

We expand the traditional tax incentive redundancy argument by investigating the implications of allocating incentives primarily to firms that would have invested even in the absence of special tax treatment. Incorporating government revenue constraints, pliable tax officials, endogenous tax liabilities, and firms with heterogeneous before-tax returns, we show that tax incentives, if given to the "wrong" firms, are not only ineffective in stimulating FDI, but result in a form of tax shifting and may reduce FDI. Data from countries of the former Eastern Bloc suggests that tax incentive schemes have significantly negative impacts on FDI in countries that poorly target firms.

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Publisher Info
Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 11 (2004)
Issue (Month): 5 (09)
Pages: 647-660
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Handle: RePEc:kap:itaxpf:v:11:y:2004:i:5:p:647-660

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Article
- Kelly Edmiston & Shannon Mudd & Neven Valev, 2004. "Incentive Targeting, Influence Peddling, and Foreign Direct Investment," Asia-Pacific Financial Markets, Springer, vol. 11(5), pages 647-660, September. [Downloadable!] (restricted)
Paper
- Kelly Edmiston & Shannon Mudd & Neven Valev, 2000. "Incentive Targeting, Influence Peddling, and Foreign Direct Investment," International Studies Program Working Paper Series, at AYSPS, GSU paper0007, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]

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Other versions:
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Other versions:
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Other versions:
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