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Are tax rates still decisive in FDI investment Choice or what drives sectoral FDI nowadays?

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  • Nicolae-Bogdan Ianc

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, UVT - Universitatea de Vest din Timișoara [România] = West University of Timișoara [Romania] = Université Ouest de Timișoara [Roumanie])

Abstract

We explore the effects of effective taxation and institutional quality on sectoral FDI. Our analysis comprises European countries and we use data from 2002 to 2020. We employ a GMM approach and show that a rise in both apparent taxation and tax differential reduces sectoral FDI flow while soaring tax differential increase FDI stock. Among the institutional variables, tertiary enrollment attract FDI and secondary attainment has opposite results depending on the sectoral FDI. Our findings indicate that government should lower taxation for more FDI flows and strengthen tertiary and secondary enrollment.

Suggested Citation

  • Nicolae-Bogdan Ianc, 2023. "Are tax rates still decisive in FDI investment Choice or what drives sectoral FDI nowadays?," Working Papers hal-04154359, HAL.
    • Handle: RePEc:hal:wpaper:hal-04154359
    Note: View the original document on HAL open archive server: https://univ-orleans.hal.science/hal-04154359
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    Keywords

    Sectoral FDI effective taxation institution quality European countries. JEL classification: F21 H21 O43; Sectoral FDI; effective taxation; institution quality; European countries. JEL classification: F21; H21; O43;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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