TY  - JOUR
AU  - Razin,Assaf
AU  - Sadka,Efraim
TI  - Productivity and Taxes as Drivers of FDI
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13094
PY  - 2007
Y2  - May 2007
UR  - http://www.nber.org/papers/w13094
L1  - http://www.nber.org/papers/w13094.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

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  - We develop a framework in which the host country productivity has a positive effect on the intensive margin (the size of FDI flows), but only an ambiguous effect on the extensive margin (the likelihood of FDI flows to occur). The source-country productivity has a negative effect on the extensive margin. An increase in the host-country corporate tax rate reduces the actual FDI flows the likelihood of such flows to occur. An increase in the source-country corporate tax rate  reduces the likelihood of FDI flows.  These predictions are confronted with  Data on FDI flows, drawn from the International Direct Investment dataset (Source OECD), covering the bilateral FDI flows among 18 OECD countries over the period 1987 to 2003. We find some support for the main predictions of the model.
ER  -