Do Taxes Matter for FDI Flows to Mexico?

Gonzalez del Real, Pablo (2010) Do Taxes Matter for FDI Flows to Mexico? [Dissertation (University of Nottingham only)] (Unpublished)

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There have been several studies focusing on the factors influencing the location decision of multinationals. However, the empirical literature considering tax policies as a determinant of foreign direct investment (FDI) has been limited in several respects, with most studies focused on developed countries and exclusively considering host country taxes. The aim of this paper is to extend those boundaries by analyzing the effect of taxes on FDI flows to a developing country and incorporating both host and home country tax rates as determinants.

This paper estimates the effect of taxes on FDI flows to Mexico by considering a panel of the eight most representative investing countries from 1990 to 2008. Besides the tax variables, other macroeconomic factors as important location determinants were included to the model. The estimates show that after controlling for specific country effects, the corporate tax rate of both, source and host country, are important determinants of FDI flows to Mexico. This paper also demonstrates that investors’ response to taxes differ depending on the tax system of their home country. This is, the response of investors from countries under a worldwide taxation system differ from that of investors from a territorial tax system.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 18 Jan 2011 16:04
Last Modified: 13 May 2016 03:30

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