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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.

Suggested Citation

  • Robert E. Lipsey, 2007. "Defining and Measuring the Location of FDI Output," NBER Working Papers 12996, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12996
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    References listed on IDEAS

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    Cited by:

    1. Torfinn Harding & Beata S. Javorcik, 2011. "Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows," Economic Journal, Royal Economic Society, vol. 121(557), pages 1445-1476, December.
    2. Azemar, Celine, 2008. "International Corporate Taxation and U.S. Multinationals Behavior: an Integrated Approach," SIRE Discussion Papers 2008-40, Scottish Institute for Research in Economics (SIRE).
    3. Celine Azemar & Julia Darby & Rodolphe Desbordes & Ian Wooton, 2012. "Market Familiarity and the Location of South and North MNEs," Economics and Politics, Wiley Blackwell, vol. 24(3), pages 307-345, November.
    4. Benjamin Bridgman & Michael Maio & James A. Schmitz, 2012. "What ever happened to the Puerto Rican sugar manufacturing industry?," Staff Report 477, Federal Reserve Bank of Minneapolis.
    5. TANAKA Kiyoyasu, 2015. "The Impact of Foreign Firms on Industrial Productivity: A Bayesian-model averaging approach," Discussion papers 15009, Research Institute of Economy, Trade and Industry (RIETI).
    6. Akhtaruzzaman, M. & Berg, Nathan & Hajzler, Christopher, 2017. "Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?," European Journal of Political Economy, Elsevier, vol. 49(C), pages 84-107.
    7. Fernando Mistura & Caroline Roulet, 2019. "The determinants of Foreign Direct Investment: Do statutory restrictions matter?," OECD Working Papers on International Investment 2019/01, OECD Publishing.
    8. Stefano Federico, 2016. "How does multinational production affect the measurement of competitiveness?," Questioni di Economia e Finanza (Occasional Papers) 301, Bank of Italy, Economic Research and International Relations Area.
    9. Harding, Torfinn & Javorcik, Beata Smarzynska, 2007. "Developing economies and international investors : do investment promotion agencies bring them together ?," Policy Research Working Paper Series 4339, The World Bank.
    10. Céline Azémar, 2010. "International corporate taxation and U.S. multinationals' behaviour: an integrated approach," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 232-253, February.
    11. Cooper, Maggie & Nguyen, Quyen T.K., 2020. "Multinational enterprises and corporate tax planning: A review of literature and suggestions for a future research agenda," International Business Review, Elsevier, vol. 29(3).
    12. Gonchar, Ksenia & Marek, Philipp, 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 3/2013, Halle Institute for Economic Research (IWH).
    13. Sjoerd Beugelsdijk & Jean-François Hennart & Arjen Slangen & Roger Smeets, 2010. "Why and how FDI stocks are a biased measure of MNE affiliate activity," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1444-1459, December.
    14. Cooper, Maggie & Nguyen, Quyen T.K., 2019. "Understanding the interaction of motivation and opportunity for tax planning inside US multinationals: A qualitative study," Journal of World Business, Elsevier, vol. 54(6), pages 1-1.
    15. Bruno Casella, . "Looking through conduit FDI in search of ultimate investors – a probabilistic approach," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    16. Jinjarak, Yothin, 2007. "Foreign direct investment and macroeconomic risk," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 509-519, September.
    17. Wacker, Konstantin M., 2013. "On the measurement of foreign direct investment and its relationship to activities of multinational corporations," Working Paper Series 1614, European Central Bank.
    18. Tanaka, Kiyoyasu, 2015. "The impact of foreign firms on industrial productivity : evidence from Japan," IDE Discussion Papers 533, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    19. Aruna Gounder & Rod Falvey & Gulasekaran Rajaguru, 2019. "The Effects of Preferential Trade Agreements on Foreign Direct Investment: Evidence from the African Caribbean Pacific Region," Open Economies Review, Springer, vol. 30(4), pages 695-717, September.
    20. Céline Azémar, 2010. "International corporate taxation and U.S. multinationals' behaviour: an integrated approach," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(1), pages 232-253, February.
    21. Richard Bolwijn & Bruno Casella & Davide Rigo, . "An FDI-driven approach to measuring the scale and economic impact of BEPS," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    22. Edward Nissan & Miguel-Angel Galindo & Maria Teresa Méndez, 2010. "The future of services in a globalized economy," The Service Industries Journal, Taylor & Francis Journals, vol. 31(1), pages 59-78, February.

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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