Foreign direct investment and the dark side of decentralization
"Both in the developed and developing world, decentralization of fiscal policy is frequently argued to foster investment, because allowing investors to choose between competing locations should make it difficult for each jurisdiction to tax the investment's returns. We point out that this 'horizontal' dimension of decentralization cannot eliminate ex post incentives to tax investments once they are irreversibly located in a jurisdiction, and that the negative ex ante investment effects of such 'hold up' problems are actually stronger when decentralization inevitably leads to multiple levels of taxation power in each location. Empirically, we detect significant negative effects on FDI of the 'vertical' dimension of decentralization, measured by the number of government layers, in a data set containing many countries and many suitable control variables. Indicators of overall fiscal decentralization do not appear to affect the investment climate negatively per se, but our theoretical arguments and empirical results suggest that policymakers should consider very carefully the form and degree of government decentralization if they aim at improving the investment climate." Copyright (c) CEPR, CES, MSH, 2007.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 22 (2007)
Issue (Month): (01)
Pages: 5-70
| Handle: | RePEc:bla:ecpoli:v:22:y:2007:i::p:5-70 |
| Contact details of provider: | Postal: Phone: +44 (0)20 7183 8801 Fax: +44 (0)20 7183 8820 Web page: http://www.blackwellpublishing.com/journal.asp?ref=0266-4658Email: More information through EDIRC Postal: More information through EDIRC Postal: More information through EDIRC
|
| Order Information: | Web: http://www.blackwellpublishing.com/subs.asp?ref=0266-4658 |
No references listed on IDEAS
You can help add them by filling out this form.
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.
When requesting a correction, please mention this item's handle: RePEc:bla:ecpoli:v:22:y:2007:i::p:5-70. 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: (Wiley-Blackwell Digital Licensing)
or (Christopher F. Baum)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.