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Does Corruption Relieve Foreign Investors of the Burden of Taxes and Capital Controls?

In: International Taxation and Multinational Activity

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  • Shang-Jin Wei

Abstract

In a sample of fourteen source countries making bilateral investments in forty five countries, the author finds that taxes, capital controls, and corruption, all have large, statistically significant negative effects on foreign investment. Moreover, there is no robust support in the data for the"efficient grease"hypothesis - that corruption helps attract foreign investment by reducing firms'tax burden and the irritant of capital controls.

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This chapter was published in:

  • James R. Hines, Jr., 2000. "International Taxation and Multinational Activity," NBER Books, National Bureau of Economic Research, Inc, number hine00-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10720.

    Handle: RePEc:nbr:nberch:10720

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, Elsevier, vol. 48(1), pages 7-35, June.
    2. Martin Feldstein & James R. Hines Jr. & R. Glenn Hubbard, 1995. "The Effects of Taxation on Multinational Corporations," NBER Books, National Bureau of Economic Research, Inc, number feld95-2.
    3. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," NBER Working Papers 6030, National Bureau of Economic Research, Inc.
    4. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 681-712, August.
    5. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
    6. James R. Hines, Jr., 1995. "Forbidden Payment: Foreign Bribery and American Business After 1977," NBER Working Papers 5266, National Bureau of Economic Research, Inc.
    7. Mihir A. Desai & James R. Hines, Jr., 1996. ""Basket" Cases: International Joint Ventures After the Tax Reform Act of 1986," NBER Working Papers 5755, National Bureau of Economic Research, Inc.
    8. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, Elsevier, vol. 47(1), pages 61-95, June.
    9. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(4), pages 760-81, August.
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    Cited by:
    1. Lars Siemers & Axel Dreher, 2005. "The Intriguing Nexus between Corruption and Capital Account Restrictions," RWI Discussion Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung 0035, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    2. Jelena Budak & Edo Rajh, 2011. "Corruption as an Obstacle for Doing Business in the Western Balkans: A Business Sector Perspective," Working Papers, The Institute of Economics, Zagreb 1104, The Institute of Economics, Zagreb.
    3. International Monetary Fund, 2000. "Corruption and Military Spending," IMF Working Papers 00/23, International Monetary Fund.
    4. Axel Dreher & Martin Gassebner, 2007. "Greasing the wheels of entrepreneurship? The impact of regulations and corruption on firm entry," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 07-166, KOF Swiss Economic Institute, ETH Zurich.
    5. Kaufmann, Daniel & Montoriol-Garriga, Judit & Recanatini, Francesca, 2008. "How does bribery affect public service delivery ? micro-evidence from service users and public officials in Peru," Policy Research Working Paper Series 4492, The World Bank.
    6. Klein, Michael & Aaron, Carl & Hadjimichael, Bita, 2001. "Foreign direct investment and poverty reduction," Policy Research Working Paper Series 2613, The World Bank.
    7. Bitzenis, Aristidis & Tsitouras, Antonis & Vlachos, Vasileios A., 2009. "Decisive FDI obstacles as an explanatory reason for limited FDI inflows in an EMU member state: The case of Greece," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 38(4), pages 691-704, August.
    8. Axel Dreher & Thomas Herzfeld, 2005. "The Economic Costs of Corruption: A Survey and New Evidence," Public Economics, EconWPA 0506001, EconWPA.

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