IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Tax sensitivity of foreign direct investment : an empirical assessment

  • Shah, Anwar
  • Slemrod, Joel

Tax sensitivity of foreign direct investment (FDI) has important policy implications. If FDI is not responsive to taxation, then it may be an appropriate target for taxation by the host country, which can raise revenue without sacrificing any economic benefits FDI produces. This paper examines the effects of taxation on FDI in Mexico. The empirical model used for this purpose distinguishes FDI finance by transfers and retained earnings and incorporates host and home country tax and non-tax factors including host country risk factors and credit status of multinationals. The paper concludes that empirical evidence on tax sensitivity of FDI in Mexico is quite strong. It suggests that FDI transfers and reinvested earnings respond negatively to the Mexican effective tax rate and to regulations. It is further dampened by the excess credit status of multinationals. It is encouraged by a favorable economic and political climate in Mexico, as indicated by the country credit rating of The Institutional Investor and by tariffs.

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.

File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1990/06/01/000009265_3960929212643/Rendered/PDF/multi_page.pdf
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 434.

as
in new window

Length:
Date of creation: 30 Jun 1990
Date of revision:
Handle: RePEc:wbk:wbrwps:434
Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Myron S. Scholes & Mark A. Wolfson, 1989. "The Effects of Changes in Tax Laws on Corporate Reorganization Activity," NBER Working Papers 3095, National Bureau of Economic Research, Inc.
  2. Murthy, N.R. Vasudeva, 1989. "The Effects of Taxes and Rates of Return on Foreign Direct Investment in the United States: Some Econometric Comments," National Tax Journal, National Tax Association, vol. 42(2), pages 205-07, June.
  3. Auerbach, Alan, 1990. "The cost of capital and investment in developing countries," Policy Research Working Paper Series 410, The World Bank.
  4. Young, Kan H., 1988. "The Effects of Taxes and Rates of Return on Foreign Direct Investment in the United States," National Tax Journal, National Tax Association, vol. 41(1), pages 109-21, March.
  5. Slemrod, Joel, 1993. "A North-South Model of Taxation and Capital Flows," Public Finance = Finances publiques, , vol. 48(3), pages 430-47.
  6. Alberto Giovannini, 1987. "International Capital Mobility and Tax Evasion," NBER Working Papers 2460, National Bureau of Economic Research, Inc.
  7. Auerbach, A.J. & Hines, Jr.J.R., 1988. "Investment Tax Incentives And Frequent Tax Reforms," Papers 135, Princeton, Woodrow Wilson School - Public and International Affairs.
  8. James R. Hines, Jr. & R. Glenn Hubbard, 1990. "Coming Home to America: Dividend Repatriations by U.S. Multinationals," NBER Working Papers 2931, National Bureau of Economic Research, Inc.
  9. Michael J. Boskin & William G. Gale, 1986. "New Results on the Effects of Tax Policy on the International Location of Investment," NBER Working Papers 1862, National Bureau of Economic Research, Inc.
  10. Hartman, David G., 1985. "Tax policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 26(1), pages 107-121, February.
  11. Conrad, Robert F., 1989. "Considerations for the development of tax policy when capital is internationally mobile," Policy Research Working Paper Series 47, The World Bank.
  12. Bond, Eric W. & Samuelson, Larry, 1989. "Bargaining with commitment, choice of techniques, and direct foreign investment," Journal of International Economics, Elsevier, vol. 26(1-2), pages 77-97, February.
  13. Assaf Razin & Joel Slemrod, 1990. "Taxation in the Global Economy," NBER Books, National Bureau of Economic Research, Inc, number razi90-1, August.
  14. Slemrod, J., 1989. "Tax Effects Of Foreign Direct Investment In The U.S.: Evidence From A Cross-Country Comparison," Working Papers 254, Research Seminar in International Economics, University of Michigan.
Full references (including those not matched with items on IDEAS)

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:wbk:wbrwps:434. 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: (Roula I. Yazigi)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.