The Quest for Non-Resource-Based FDI: Do Taxes Matter?

January 27, 2014

Preview Citation

Format: Chicago

Tidiane Kinda. The Quest for Non-Resource-Based FDI: Do Taxes Matter?, (USA: International Monetary Fund, 2014) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Using manufacturing and services firm-level data for 30 sub-Saharan African (SSA) countries, this paper shows that taxation is not a significant driver for the location of foreign firms in SSA, while other investment climate factors, such as infrastructure, human capital, and insitutions, are. By analyzing disaggregate FDI data, the paper establishes that, while there is considerable contrast in behavior between vertical FDI (foreign firms producing for export) and horizontal FDI (foreign firms producing for local markets), taxation is not a key determinant for either type of FDI. Horizontal FDI is attracted to areas with higher trade regulations, highlighting interest in protected markets. Furthermore, horizontal FDI is affected more by financing and human capital constraints, and less by infrastructure and institutional constraints, than is vertical FDI.

Subject: Balance of payments, Economic sectors, Exports, Foreign corporations, Foreign direct investment, Human capital, Infrastructure, International trade, Labor, National accounts

Keywords: Africa, Caribbean, Characteristic variable, Company, Enterprise survey, Exporter firm, Exports, Firm size, Firm-level data, Firms' characteristic, Foreign corporations, Foreign direct investment, Foreign firm, Horizontal FDI, Human capital, Infrastructure, Investment climate, Non-resource-based FDI, Perceived criteria, Perception of crime, Sub-Saharan Africa, Taxation, Vertical FDI, Working capital, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/015
Stock No:

WPIEA2014015
ISBN:

9781475514094
ISSN:

1018-5941

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