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Foreign Direct Investment, Tax Competition and Social Expenditure

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  • Holger Görg,
  • Hassan Molana,
  • Catia Montagna

Abstract

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that redistributive social welfare state policies are valued by multinationals as, for instance, they may signal a government's commitment to social stability.

Suggested Citation

  • Holger Görg, & Hassan Molana, & Catia Montagna, "undated". "Foreign Direct Investment, Tax Competition and Social Expenditure," Discussion Papers 07/03, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:07/03
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Katharina van Treeck & K.M. Wacker, 2017. "Financial Globalization and the Labor Share in Developing Countries: The Type of Capital Matters," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 219, Courant Research Centre PEG.
    2. repec:spr:soinre:v:133:y:2017:i:3:d:10.1007_s11205-016-1403-5 is not listed on IDEAS
    3. Jonathan Perraton, 2011. "The Scope and Implications of Globalisation," Chapters,in: The Handbook of Globalisation, Second Edition, chapter 3 Edward Elgar Publishing.
    4. repec:ilo:ilowps:485510 is not listed on IDEAS
    5. Roberto Antonietti & Raffaello Bronzini & Giulio Cainelli, 2015. "Inward greenfield FDI and innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 93-116, March.
    6. Markus Leibrecht & Michael Klien & Oezlem Onaran, 2011. "Globalization, welfare regimes and social protection expenditures in Western and Eastern European countries," Public Choice, Springer, vol. 148(3), pages 569-594, September.
    7. Antoci, Angelo & Borghesi, Simone & Russu, Paolo & Ticci, Elisa, 2015. "Foreign direct investments, environmental externalities and capital segmentation in a rural economy," Ecological Economics, Elsevier, vol. 116(C), pages 341-353.
    8. 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).
    9. Mayer, Wolfgang & Mourmouras, Alexandros, 2010. "IMF surveillance as a signal to attract foreign investment," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 562-574, October.
    10. Görg, Holger & Molana, Hassan & Montagna, Catia, 2009. "Foreign direct investment, tax competition and social expenditure," International Review of Economics & Finance, Elsevier, pages 31-37.
    11. Chen, Yu-Fu & Görg, Holger & Görlich, Dennis & Molana, Hassan & Montagna, Catia & Temouri, Yama, 2014. "Globalisation and the Future of the Welfare State," IZA Policy Papers 81, Institute for the Study of Labor (IZA).
    12. Hao, Qian & Lahiri, Sajal, 2009. "Competition for foreign direct investment: The role of technology and market structure," International Review of Economics & Finance, Elsevier, vol. 18(4), pages 680-690, October.
    13. Simone Borghesi & Giorgia Giovannetti & Gianluca Iannucci & Paolo Russu, 2016. "The dynamics of foreign direct investments in land and pollution accumulation," SEEDS Working Papers 1116, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Nov 2016.
    14. Aras Zirgulis, 2014. "Is International Capital Tax Competition Fueled by the Quest for Increased Productivity?," Proceedings of International Academic Conferences 0702435, International Institute of Social and Economic Sciences.
    15. Godar, Sarah. & Paetz, Christoph. & Truger, Achim., 2014. "Progressive tax reform in OECD countries : perspectives and obstacles," ILO Working Papers 994855103402676, International Labour Organization.
    16. Gunther Tichy, 2015. "Protecting social inclusion and mobility in a low growth scenario," WWWforEurope Working Papers series 100, WWWforEurope.
    17. 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).
    18. repec:eee:eneeco:v:64:y:2017:i:c:p:206-212 is not listed on IDEAS
    19. Sanjo, Yasuo, 2012. "Country risk, country size, and tax competition for foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 292-301.
    20. repec:spr:laecrv:v:26:y:2017:i:1:d:10.1007_s40503-017-0053-6 is not listed on IDEAS
    21. World Bank, 2013. "Trends and Determinants of Foreign Direct Investment in South Asia," World Bank Other Operational Studies 16522, The World Bank.
    22. Estelle P. Dauchy & Christopher Balding, 2013. "Asymmetric Trade Estimator in Modified Gravity: Corporate Tax Rates and Trade in OECD Countries," Working Papers w0200, Center for Economic and Financial Research (CEFIR).
    23. Aras Zirgulis, 2014. "Is International Capital Tax Competition Fueled by the Quest for Increased Productivity?," International Journal of Economic Sciences, University of Economics, Prague, vol. 2014(4), pages 99-116.
    24. Friedl, Andreas & Görlich, Dennis & Horn, Sebastian & Krieger-Boden, Christiane & Lücke, Matthias, 2015. "How to deal with inequality: Welfare system challenges and European responses," Kiel Policy Brief 85, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    Foreign Direct Investment; Tax Competition; Social Policy;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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