Taxation and foreign direct investment inflows: Time series evidence from the US

Albert Wijeweera, Don P. Clark

    Research output: Contribution to journalArticlepeer-review

    4 Scopus citations

    Abstract

    This study investigates long run and short run relationships between the corporate income tax rate and foreign direct investment (FDI) inflows to the US. The tax rate is found to exert a significant negative effect on total FDI and transfer fund inflows in the long run. A 1% decrease in the tax rate would increase total FDI by 2.4% and transfer funds by 4.2%. Collectively, results suggest that the US can use tax policies to attract FDI from abroad. Concern over the possibility of tax competition among countries to attract foreign capital is warranted.

    Original languageBritish English
    Pages (from-to)135-143
    Number of pages9
    JournalGlobal Economic Review
    Volume35
    Issue number2
    DOIs
    StatePublished - 2006

    Keywords

    • Corporate income tax rate
    • Foreign direct investment (fdi)
    • Reinvested earnings
    • Tax rate elasticities
    • Transfer funds

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