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The impact of bilateral tax treaties: A multi-country analysis of FDI inflows into India

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  • K.V. Bhanu Murthy
  • Niti Bhasin

Abstract

This paper models the role of tax treaties in promoting foreign direct investment (FDI) with the help of panel data for 14 countries for the period 1993--2011. A fixed effects (least squares dummy variable) model is developed that captures macroeconomic factors such as gross domestic product (GDP) and per capita income (PCI) in ratio form of home to host country. It also includes bilateral tax treaties as a determinant of FDI inflow. The results show that GDP is a major determinant that is demand driven and per capita income is a major determinant that is supply driven. FDI openness of the home countries and population are also significant determinants. The introduction of the treaty had a positive impact on FDI inflows into India. We get largely significant and positive results for the ‘age of the treaty effect’, especially, in the case of Germany, Switzerland and Japan. The main contribution of the paper is to show that both presence and ‘age of treaty’ are important determinants of FDI flows to India. Further, fundamentals like GDP and PCI are major variables that influence FDI inflows.

Suggested Citation

  • K.V. Bhanu Murthy & Niti Bhasin, 2015. "The impact of bilateral tax treaties: A multi-country analysis of FDI inflows into India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(6), pages 751-766, September.
    • Handle: RePEc:taf:jitecd:v:24:y:2015:i:6:p:751-766
    DOI: 10.1080/09638199.2014.960442
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    Cited by:

    1. Niti Bhasin & Rinku Manocha, 2016. "Do Bilateral Investment Treaties Promote FDI Inflows? Evidence from India," Vikalpa: The Journal for Decision Makers, , vol. 41(4), pages 275-287, December.
    2. Niti Bhasin & Shilpa Garg, 2018. "Does Host Country Institutional Quality Act as a Differentiator in Intra-regional FDI? Evidence from Selected Asian Economies," Foreign Trade Review, , vol. 53(2), pages 81-97, May.
    3. Niti Bhasin & Shilpa Garg, 2020. "Impact of Institutional Environment on Inward FDI: A Case of Select Emerging Market Economies," Global Business Review, International Management Institute, vol. 21(5), pages 1279-1301, October.

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