Investment Distinctions: The Effect of Taxes on Foreign Direct Investment in the U.S.
Most studies of taxation and foreign investment limit their investigation to the effects of tax changes on aggregate foreign investment flows. The reason is practical; little evidence is readily available that would allow researchers to consider the effects of taxes on individual firm investment decisions. However, it seems likely that this data limitation may in fact cause researchers to draw the wrong conclusions regarding the actual responsiveness of investment flows to tax differences. In part, there are reasons for firms to remain in a particular location once they have selected it once. This persistence of investment activity may cause most repeat investors to have little responsiveness to small tax differences, while newer investors will respond more vigorously.
KeywordsForeign Direct Investment Foreign Investment Agglomeration Economy Equity Increase Investment Type
Unable to display preview. Download preview PDF.
- Auerbach, Alan J. and Kevin Hassett, (1993), “Taxation and Foreign Direct Investment in the United States: A Reconsideration of the Evidence,“ in Alberto Giovannini, R. Glenn Hubbard, and Joel Slemrod eds. Studies in International Taxation, 119–144.Google Scholar
- Bartik, Timothy J. (1991) who Benefits from State and Local Economic Development Policies? (W.E. Upjohn Institute: Kalamazoo, Michgan).Google Scholar
- Brainard, Lael S. (1997) “An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade,“ American Economic Review, 87(4):520–544.Google Scholar
- Caves, Richard E. (1996). Multinational Enterprise and Economic Analysis, second edition. Cambridge: Cambridge University Press.Google Scholar
- Hallward-Driemeier, Mary. (1996) “Understanding Foreign Direct Investment by Firms: Market Pull, Cost Push and Knowledge Accumulation,“ Massachusetts Institute of Technology, manuscript.Google Scholar
- Head, C. Keith, John C. Ries, and Deborah L. Swenson, (1994) “The Attraction of Foreign Manufacturing Investments: Investment Promotion and Agglomeration Economies,“ NBER Working Paper 4878.Google Scholar
- Hines, James R. (1996a) “Altered States: Taxes and the Location of Foreign Direct Investment in America,“ American Economic Review, v86, no 5, p1076–1094.Google Scholar
- Hines, James R. (1996b) “Tax Policy and the Activities of Multinational Corporations,“ NBER Working Paper, #5589, May.Google Scholar
- Markusen, James R. and Anthony J. Venables, (1996), “The Theory of Endowment, Intra-Industry, and Multinational Trade,“ National Bureau of Economic Research Working Paper #5529.Google Scholar
- Roberts, Mark and James Tybout. (1995) “An Empirical Model of Sunk costs and the Decision to Export.” World Bank Policy Research Working Paper, No. 1436.Google Scholar
- Ondrich, Jan and Michael Wasylenko, (1993) Foreign Direct Investment in the United States: Issues, Magnitudes, and the Location Choice of New Manufacturing Plants, MI: W.E. Upjohn Institute.Google Scholar
- Scholes, Myron S. and Mark A. Wolfson. (1992) Taxes and Business Strategy: A Planning Approach. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
- Wasylenko, Michael. “Empirical Evidence on Interregional Business Location Decisions and the Role of Fiscal Incentives in Economic Development,“ in Henry W. Herzon, Jr. and Alan M. Schlottmann, eds., Industry Location and Public Policy. Knoxville, TN: University of Tennesse Press, 1991, 13–30.Google Scholar