Quotation Bellak, Christian, Leibrecht, Markus, Damijan, Joze. 2009. Infrastructure Endowment and Corporate Income Taxes as Determinants of Foreign Direct Investment in Central and Eastern European Countries. World Economy 32 (2): 267-290.


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Abstract

This paper analyses the importance of taxes on corporate income and production-related tangible infrastructure as determinants of foreign direct investment (FDI) in Central and Eastern European countries (CEECs). We operationalise taxes using effective average tax rates on the bilateral level and employ indices derived from principal component analysis as a proxy for the infrastructure endowment. In the empirical analysis we control for a possible interrelation between taxes and infrastructure as determinants of FDI – an issue usually neglected in the literature. Specifically, a favourable infrastructure endowment may compensate for relatively high taxes. Hence, higher taxes may not deter FDI. The results from our panel econometric analysis of bilateral outward FDI flows of seven home countries in eight CEECs for the 1995–2004 period in an augmented gravity model setting show that (i) both taxes and infrastructure play a role in the location decisions made by multinational enterprises; (ii) telecommunication and transport infrastructure are of special significance to FDI; and (iii) the tax-rate sensitivity of FDI indeed decreases with the level of infrastructure endowment.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal World Economy
Citation Index SSCI
WU-Journal-Rating new FIN-A, VW-C
Language English
Title Infrastructure Endowment and Corporate Income Taxes as Determinants of Foreign Direct Investment in Central and Eastern European Countries
Volume 32
Number 2
Year 2009
Page from 267
Page to 290
Reviewed? Y
URL http://web.ebscohost.com/ehost/resultsadvanced?vid=3&hid=113&sid=5d1c44ed-c16a-45e9-b750-04551d6e2385%40sessionmgr109&bquery=(JN+%22World+Economy%22)+and+(AU+(+bellak+))&bdata=JmRiPWJ1aCZjbGkwPURUMSZjbHYwPTIwMDkwMS0wMDEmdHlwZT0xJnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d

Associations

Projects
F2013: Linking Infrastructure and Taxes as Determinants of Multinational Activity: An Empirical Study of Foreign Direct Investment in Central and Eastern European Countries
People
Bellak, Christian (Details)
Leibrecht, Markus (Former researcher)
External
Damijan, Joze (University of Ljubljana, Slovenia)
Organization
Institute for Public Sector Economics IN (Details)
Research Institute for International Taxation FI (Details)
Institute for Economic Policy and Industrial Economics IN (Details)
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