Incentive Targeting, Influence Peddling, and Foreign Direct Investment
AbstractWe expand the traditional tax incentive redundancy argument by investigating the implications of targeting incentives primarily to firms that would have invested anyway. 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 may reduce it. Data from countries of the former Eastern Bloc indicates that tax incentive schemes have significantly negative impacts on FDI in countries that poorly target firms.
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Bibliographic InfoPaper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0007.
Length: 25 pages
Date of creation: 01 Sep 2000
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Incentive Targeting; Influence Peddling; Foreign Direct Investment;
Other versions of this item:
- Kelly D. Edmiston & Shannon Mudd & Neven T. Valev, 2004. "Incentive Targeting, Influence Peddling, and Foreign Direct Investment," International Tax and Public Finance, Springer, vol. 11(5), pages 647-660, 09.
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