TY  - JOUR
AU  - Razin,Assaf
AU  - Rubinstein,Yona
AU  - Sadka,Efraim
TI  - Corporate Taxation and Bilateral FDI with Threshold Barriers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11196
PY  - 2005
Y2  - March 2005
UR  - http://www.nber.org/papers/w11196
L1  - http://www.nber.org/papers/w11196.pdf
N1  - Author contact info:
Assaf Razin
Department of Economics
Cornell University
Uris 422
Ithaca, NY 14853
Tel: 607/255-9625
Fax: 607/255-2818
E-Mail: ar256@cornell.edu

Yona Rubinstein
Brown University
Department of Economics
Box B
Providence, RI 02912
E-Mail: y.rubinstein@lse.ac.uk

Efraim Sadka
Tel Aviv University
Eitan Berglas School of Economics
P.O.B. 39040
Ramat Aviv, Tel Aviv, 69978, ISRAEL
E-Mail: sadka@post.tau.ac.il
AB  - The paper brings out the special mechanism through which taxes influence bilateral FDI, when investment decisions are two-fold in the presence of fixed setup flows costs. For each pair of source-host countries, there is a set of factors determining whether aggregate FDI flows will occur at all, and a different set of factors determimnig the volume of FDI flows (provided that they occur). We demonstrate that the notion that the mere international tax differetials are a key factor behind the direction and magnitude of FDI flows is too simple. We argue that the source country tax rate works primarely on the selection process, whereas the host-country tax rate affect mainly the magnitude of the FDI, once they occur. We analyze international panel data with 24 OECD countries over the period 1981-1998 by the Heckman selection method to bring evidence in support of this argument.
ER  -