Advanced Search
MyIDEAS: Login to save this paper or follow this series

Taxation, Business Environment and FDI Location in OECD Countries


Author Info

  • Dana Hajkova
  • Giuseppe Nicoletti
  • Laura Vartia
  • Kwang-Yeol Yoo


This paper assesses the importance of taxation on foreign direct investment contributing to the literature in two ways. First, it relates bilateral FDI among OECD countries over the 1990s to a new set of estimates of corporate tax wedges that include many relevant aspects of FDI taxation. Second, it controls for a large set of additional policy and non-policy factors that may affect the attractiveness of a country for foreign investors. Furthermore, the empirical approach is novel in that it focuses on a semi-parametric estimation methodology that accounts for a number of unobserved effects possibly impinging on the choice of investment location by multinational enterprises. Consistent with previous findings, the estimation results suggest that corporate taxation has a non-negligible impact on FDI location choices. However, the results suggest that focusing only on taxation in home and host countries and omitting other policies (such as border policies and labour and product market settings) may lead to a serious overestimation of tax elasticities and their relevance for policy. Fiscalité, environnement des entreprises et localisation des IDE dans les pays OCDE Cette étude évalue l'importance des politiques fiscales pour les investissements directs étrangers (IDE). Il contribue a littérature de deux façons: d'une part, l'étude établit un rapport entre les IDE bilatéraux dans les pays de l'OCDE pendant les années 90 et un nouvel ensemble d'indicateurs de taux effectifs d'imposition des sociétés couvrant plusieurs aspects de la taxation sur les IDE. D?autre part, il contrôle pour un ensemble des politiques économiques et autres facteurs susceptibles d'influencer l'attractivité d'un territoire pour les investisseurs étrangers. En outre, l'approche empirique est originale dans la mesure où elle utilise une méthodologie d'estimation semi-parametrique qui tient compte des effets inobservables affectant le choix de localisation des entreprises multinationales. En ligne avec les conclusions de la littérature, les résultats indiquent que l'imposition des sociétés a des incidences non-négligeables sur les choix de localisation des IDE. Cependant, les résultats indiquent qu'il est possible de sérieusement surestimer les élasticités par rapport aux taxes et leur importance politique en se concentrant seulement sur les impôts dans les pays d'origine et d'accueil des investissements, sans prendre en compte un certain nombre de politiques (telles que les obstacles frontaliers et le fonctionnement du marché du travail et des produits).

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 502.

as in new window
Date of creation: 24 Jul 2006
Date of revision:
Handle: RePEc:oec:ecoaaa:502-en

Contact details of provider:
Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Web page:
More information through EDIRC

Related research

Keywords: panel data; foreign direct investment; regulation; corporate taxation; fiscalité des entreprises; données de panel; investissement direct étranger;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Paulo Júlio & Ricardo Pinheiro–Alves & José Tavares, 2013. "Foreign direct investment and institutional reform: evidence and an application to Portugal," Portuguese Economic Journal, Springer, Springer, vol. 12(3), pages 215-250, December.
  2. Popovici Oana Cristina, 2012. "Is Taxation Affecting The Attractiveness Of Central And Eastern Europe Countries For Fdi?," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 141-145, March.
  3. Timothy Goodspeed & Jorge Martinez-Vazquez & Li Zhang, 2010. "Public Policies and FDI Location: Differences Between Developing and Developed Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper1001, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. Davide Furceri & Stéphanie Guichard & Elena Rusticelli, 2011. "Medium-Term Determinants of International Investment Positions: The Role of Structural Policies," OECD Economics Department Working Papers 863, OECD Publishing.
  5. Marcin Piatkowski & Mariusz Jarmuzek, 2008. "Zero Corporate Income Tax in Moldova," IMF Working Papers 08/203, International Monetary Fund.
  6. Thomas Dalsgaard, 2008. "Japan's Corporate Income Tax," IMF Working Papers 08/70, International Monetary Fund.
  7. Tehmina S. Khan & John Norregaard, 2007. "Tax Policy," IMF Working Papers 07/274, International Monetary Fund.
  8. Kevin S Markle, 2012. "A Comparison of the Tax-motivated Income Shifting of Multinationals in Territorial and Worldwide Countries," Working Papers, Oxford University Centre for Business Taxation 1206, Oxford University Centre for Business Taxation.
  9. Timothy Goodspeed & Jorge Martinez-Vazquez & JLi Zhang, 2006. "Are Government Policies More Important Than Taxation in Attracting FDI," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0614, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  10. repec:pts:wpaper:f1 is not listed on IDEAS
  11. R. Schoonackers & F. Heylen, 2011. "Fiscal Policy and TFP in the OECD: A Non-Stationary Panel Approach," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 11/701, Ghent University, Faculty of Economics and Business Administration.
  12. Hristu-Varsakelis, Dimitrios & Karagianni, Stella & Saraidaris, Anastasios, 2011. "Equilibrium conditions in corporate tax competition and Foreign Direct Investment flows," Economic Modelling, Elsevier, Elsevier, vol. 28(1-2), pages 13-21, January.
  13. Andreas Breitenfellner & Jesus Crespo Cuaresma & Peter Mooslechner & Doris Ritzberger-Grünwald, 2008. "The Impact of EU Enlargement in 2004 and 2007 on FDI and Migration Flows Gravity Analysis of Factor Mobility," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 101–120.
  14. Paulo Júlio & Ricardo Pinheiro-Alves & José Tavares, 2011. "FDI and institutional reform in Portugal," GEE Papers, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação 0040, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Sep 2011.
  15. Driton Qehaja, 2012. "Fiscal Policy Response to External Crises the Case of Moldova 1998-2010," IMF Working Papers 12/82, International Monetary Fund.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:502-en. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.