Template-type: ReDIF-Paper 1.0
Author-Name: Timothy Goodspeed
Author-Email:timothy.goodspeed@hunter.cuny.edu
Author-Workplace-Name:Hunter College and CUNY Graduate Center 
Author-Workplace-Homepage: http://www.hunter.cuny.edu/
Author-Name: Jorge Martinez-Vazquez 
Author-Email: jorgemartinez@gsu.edu 
Author-Homepage: https://icepp.gsu.edu/profile/jorge-martinez-vazquez/
Author-Workplace-Name:  International Studies Program. Andrew Young School of Policy Studies, Georgia State University
Author-Workplace-Homepage:  https://icepp.gsu.edu/
Author-Name:JLi Zhang
Author-Email:
Title: Are Government Policies More Important Than Taxation in Attracting FDI 
Abstract:This paper attempts to broaden the existing empirical literature on foreign direct investment by incorporating government expenditures (both investment in infrastructure and consumption) as well as tax, classical location factors, institutional factors that may hinder business investment (such as corruption), and agglomeration effects. We investigate the determinants of FDI inflows in two unbalanced panel data sets of 47 countries from 1995-2002 and 37 countries from 1996-2002. We use fixed country and year effects and examine different infrastructure measures. The evidence indicates that lower taxes, lower corruption, and better infrastructure attract FDI. Government consumption expenditures negatively impact FDI inflows. The magnitude of the response of FDI to our investment in infrastructure is similar to that of corruption and taxes in elasticity terms.
Keywords: FDI, government expenditures, tax level and corruption
Length: 26 pages
Creation-Date: 2006-03-01
File-URL: http://icepp.gsu.edu/files/2015/03/ispwp0614.pdf
File-Format:application/pdf
Handle: RePEc:ays:ispwps:paper0614