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Defining and Measuring the Location of FDI Output

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  • Robert E. Lipsey

Abstract

The standard measures of flows and stocks of FDI view FDI as a financial flow and its accumulation as a stock, but most uses of FDI data require measures of employment, payrolls, capital inputs, and output from FDI. Judging by data for the United States, the flow and stock data provide rough approximations to country distributions of FDI sources and destinations, but are poor approximations to industry distributions of FDI and to changes over time in country and industry distributions. One important reason for the poor match between the two types of measures is that more and more of production is the output from intangible and financial assets, the location of which is determined by the firm itself, and not easily subject to outside verification. That development is combined with the increasing use of holding companies and chains of ownership to reduce tax burdens on the firms without necessarily altering the physical location of inputs or production. These developments have drawn the attention of tax authorities and led to some proposals that would reduce firms' ability to manipulate the location of assets and profits. However, these maneuvers also lead to ambiguities in the meaning of economic measures, such as the balance of payments and national product. The effects on economic measurements, which may influence many types of economic policy, have been submerged in the concern for tax revenues.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12996.

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Date of creation: Mar 2007
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Handle: RePEc:nbr:nberwo:12996

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  1. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2002. "Chains of Ownership, Regional Tax Competition, and Foreign Direct Investment," NBER Working Papers 9224, National Bureau of Economic Research, Inc.
  2. James R. Hines Jr., 2004. "Do Tax Havens Flourish?," NBER Working Papers 10936, National Bureau of Economic Research, Inc.
  3. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  4. Fuest, Clemens & Hemmelgarn, Thomas & Ramb, Fred, 2006. "How would formula apportionment in the EU affect the distribution and the size of the corporate tax base? An analysis based on German multinationals," Discussion Paper Series 1: Economic Studies 2006,20, Deutsche Bundesbank, Research Centre.
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Cited by:
  1. Jinjarak, Yothin, 2007. "Foreign direct investment and macroeconomic risk," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 509-519, September.
  2. Beugelsdijk, S. & Hennart, J.M.A. & Slangen, A.H.L. & Smeets, R., 2010. "Why and how FDI stocks are a biased measure of MNE affiliate activity," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3982853, Tilburg University.
  3. K. Gonchar & Philipp Marek, 2013. "Natural-resource or Market-seeking FDI in Russia? An Empirical Study of Locational Factors Affecting the Regional Distribution of FDI Entries," IWH Discussion Papers, Halle Institute for Economic Research 3, Halle Institute for Economic Research.
  4. Torfinn Harding, Torfinn; Javorcik, Beata S., 2010. "Roll out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 18, Competitive Advantage in the Global Economy (CAGE).
  5. Céline Azémar, 2010. "International corporate taxation and U.S. multinationals' behaviour: an integrated approach," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 43(1), pages 232-253, February.
  6. Torfinn Harding & Beata Smarzynska Javorcik, 2007. "Developing economies and international investors. Do investment promotion agencies bring them together?," Discussion Papers, Research Department of Statistics Norway 513, Research Department of Statistics Norway.
  7. Azemar, Celine & Darby, Julia & Desbordes, Rodolphe & Wooton, Ian, 2012. "Market Familiarity and the Location of South and North MNEs," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2012-15, Scottish Institute for Research in Economics (SIRE).
  8. Benjamin Bridgman & Michael Maio & James A. Schmitz, Jr., 2012. "What ever happened to the Puerto Rican sugar manufacturing industry?," Staff Report, Federal Reserve Bank of Minneapolis 477, Federal Reserve Bank of Minneapolis.
  9. Celine Azemar & Julia Darby & Rodolphe Desbordes & Ian Wooton, 2012. "Market Familiarity and the Location of South and North MNEs," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 24(3), pages 307-345, November.
  10. Ksenia Gonchar & Philipp Marek, 2013. "Natural-resource or market-seeking FDI in Russia? An empirical study of locational factors affecting the regional distribution of FDI entries," HSE Working papers, National Research University Higher School of Economics WP BRP 26/EC/2013, National Research University Higher School of Economics.

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