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Public Policies and FDI Location: Differences between Developing and Developed Countries

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Abstract

Host country government officials in developing and developed countries alike would like to know the impact of their public policies on foreign investment in their countries. Unfortunately, the literature does not provide a single view, and there are likely to be differences between developing and developed countries. This paper examines the impact of three host country government policies on the host’s FDI stock: taxation, good governance, and infrastructure. We focus on whether the impact of these factors on FDI differs depending on the level of development of the host country. The regression results indicate that FDI is sensitive to host country taxation in developed countries, but not in developing countries; FDI is sensitive to host country corruption in developing countries but not developed; and FDI shows sensitivity to host country infrastructure quality in both developed and developing host countries, though FDI appears to be more sensitive in developing host countries.

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  • Timothy Goodspeed & Jorge Martinez-Vazquez & Li Zhang, 2009. "Public Policies and FDI Location: Differences between Developing and Developed Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0910, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper0910
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    Cited by:

    1. Alm, James & Martinez-Vazquez, Jorge & McClellan, Chandler, 2016. "Corruption and firm tax evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 124(C), pages 146-163.
    2. Jorge Martinez-Vazquez & Timothy Goodspeed & Li Zhang, 2011. "Do Companies View Bribes as a Tax? Evidence on the Trade-off between Corporate Taxes and Corruption in the Location of FDI," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Hawkes, Denise Donna & Yerrabati, Sridevi, 2015. "Institutions and investment in South and East Asia & Pacific region: Evidence from meta-analysis," Economics Discussion Papers 2015-62, Kiel Institute for the World Economy (IfW).
    4. Athiphat Muthitacharoen, 2017. "Assessing the Importance of Taxation on FDI: Evidence from South-East Asian Developing Countries," PIER Discussion Papers 65, Puey Ungphakorn Institute for Economic Research, revised Jul 2017.
    5. Oana Cristina POPOVICI, 2016. "Determinants Of Fdi In The New Eu Member States," Romanian Economic Business Review, Romanian-American University, vol. 11(2), pages 173-182, June.
    6. Krishanu Karmakar & Jorge Martinez-Vazquez, 2014. "Fiscal Competition versus Fiscal Harmonization: A Review of the Arguments," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1431, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Miroslav Mateev & Iliya Tsekov, 2014. "Are there any top FDI performers among EU-15 and CEE countries? A comparative panel data analysis," Financial Theory and Practice, Institute of Public Finance, vol. 38(3), pages 337-374.

    More about this item

    Keywords

    FDI; Developing countries; Developed countries; Foriegn Direct Investment;

    JEL classification:

    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)

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