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The quest for non-resource-based FDI: Do taxes matter?

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  • Tidiane Kinda

Abstract

Using manufacturing and services firm-level data for 30 African countries, we show that taxation is not a significant driver for the location of foreign firms in Africa, while other investment climate factors, such as infrastructure, human capital, and institutions, are. By analysing disaggregated foreign direct investment (FDI) data, we establish that, while there is considerable contrast in behaviour between vertical FDI and horizontal FDI, taxation is not a key determinant for either type of FDI. Horizontal FDI is affected more by financing and human capital constraints, and less by infrastructure and institutional constraints, than is vertical FDI.

Suggested Citation

  • Tidiane Kinda, 2018. "The quest for non-resource-based FDI: Do taxes matter?," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 11(1), pages 1-18, January.
    • Handle: RePEc:taf:macfem:v:11:y:2018:i:1:p:1-18
    DOI: 10.1080/17520843.2016.1244095
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    Cited by:

    1. Niaz Morshed & Mohammad Razib Hossain, 2022. "Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach," SN Business & Economics, Springer, vol. 2(7), pages 1-28, July.
    2. Marco Carreras & Chandu Dachapalli & Giulia Mascagni, 2017. "Effective corporate tax burden and firm size in South Africa: A firm-level analysis," WIDER Working Paper Series wp-2017-162, World Institute for Development Economic Research (UNU-WIDER).
    3. repec:idq:ictduk:16548 is not listed on IDEAS
    4. Andualem T Mengistu & Kiflu G Molla & Giulia Mascagni, 2022. "Trade Tax Evasion and the Tax Rate: Evidence from Transaction-level Trade Data," Journal of African Economies, Centre for the Study of African Economies, vol. 31(1), pages 94-122.
    5. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2018. "Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia," International Social Security Review, John Wiley & Sons, vol. 71(1), pages 3-24, January.
    6. Alexander Pakhalov, 2020. "Import of Institutions as an Approach to Investment Climate Reform: Evidence from Russia," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 6(2), pages 127-144, April.
    7. Seydou Coulibaly & Abdramane Camara, 2021. "Working Paper 354 - Taxation, Foreign Direct Investment and Spillover Effects in the Mining Sector," Working Paper Series 2480, African Development Bank.
    8. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2018. "Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia," International Social Security Review, John Wiley & Sons, vol. 71(1), pages 3-24, January.
    9. repec:idq:ictduk:15661 is not listed on IDEAS
    10. repec:idq:ictduk:3948 is not listed on IDEAS
    11. Alvaro Cuervo-Cazurra & Bernardo Silva-Rêgo & Ariane Figueira, 2022. "Financial and fiscal incentives and inward foreign direct investment: When quality institutions substitute incentives," Journal of International Business Policy, Palgrave Macmillan, vol. 5(4), pages 417-443, December.
    12. Glenn P. Jenkins & Abdallah Othman & Edna Armendariz & Anastasiya Yarygina, 2025. "Systematic Review Of Evidence On The Impact Of Tax Incentives In Latin American And Caribbean Countries," Development Discussion Papers 2025-05, JDI Executive Programs.
    13. Hania Kronfol & Victor Steenbergen, 2020. "Evaluating the Costs and Benefits of Corporate Tax Incentives," World Bank Publications - Reports 33433, The World Bank Group.
    14. International Monetary Fund, 2014. "Republic of Congo: Selected Issues," IMF Staff Country Reports 2014/273, International Monetary Fund.
    15. Marco Carreras & Purnachandar Dachapalli & Giulia Mascagni, 2017. "Effective corporate tax burden and firm size in South Africa: A firm-level analysis," WIDER Working Paper Series 162, World Institute for Development Economic Research (UNU-WIDER).

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