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The Quest for Non-Resource-Based FDI: Do Taxes Matter?
Author:
Mr. Tidiane Kinda
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Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 015
Language:
English
Publication Date:
27 Jan 2014
DOI:
https://doi.org/10.5089/9781475514094.001
ISBN:
9781475514094
ISSN:
1018-5941
Pages:
24
Keywords:
WP; company; foreign firm; enterprise survey; exporter firm; Investment climate; taxation; Non-resource-based FDI; horizontal FDI; vertical FDI; firm-level data; sub-Saharan Africa; perception of crime; firm size; working capital; firms' characteristic; characteristic variable; perceived criteria; Foreign corporations; Foreign direct investment; Infrastructure; Human capital; Exports; Africa; Caribbean
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund