For Monetary Research ® Productivity and Taxes as Drivers of Fdi

  title={For Monetary Research ® Productivity and Taxes as Drivers of Fdi},
  author={Assaf Razin and Efraim Sadka},
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 and the likelihood that such flows will occur. An increase in the source-country corporate tax rate reduces the… CONTINUE READING


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