NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tax Policy and Foreign Direct Investment in the United States

David G. Hartman

NBER Working Paper No. 967 (Also Reprint No. r0577)
Issued in August 1982
NBER Program(s):   PE

This paper provides some evidence on one aspect of international investment, the impacts of domestic tax policy on foreign direct investment in the United States. The possible impacts, which are discussed in the first section, are complex. For example, an investment incentive which applies to both domestic and foreign investors would be expected to result in an increased foreign investment in the U.S. On the other hand, a savings incentive, which has no direct impact on foreign investors, would nevertheless tend to increase domestic investors' demand for capital assets, thereby driving down the returns expected by foreign investors and possibly resulting in significant decreases in foreign investment. Because of measurement difficulties, we are only partly successful in obtaining precise estimates of this sort of impact. However, the results we do obtain suggest that foreign investment in the U.S. is strongly affected, in the manner predicted, by changes in domestic tax policy.

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Document Object Identifier (DOI): 10.3386/w0967

Published: Hartman, David G. "Tax Policy and Foreign Direct Investment in the United States." National Tax Journal, Vol. 37, No. 4, (December 1984), pp. 475-48 7.

 
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