Razin, Assaf. <br/><br/>
Corporate Taxation and Bilateral FDI with Threshold Barriers / 
Assaf Razin, Yona Rubinstein, Efraim Sadka. 
 - Cambridge, Mass.  National Bureau of Economic Research  2005. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w11196 .
 - Working Paper Series (National Bureau of Economic Research)  no. w11196. .
<br/><br/> March 2005. 
<br/><br/> The paper brings out the special mechanism through which taxes influence bilateral FDI, when investment decisions are two-fold in the presence of fixed setup flows costs. For each pair of source-host countries, there is a set of factors determining whether aggregate FDI flows will occur at all, and a different set of factors determimnig the volume of FDI flows (provided that they occur). We demonstrate that the notion that the mere international tax differetials are a key factor behind the direction and magnitude of FDI flows is too simple. We argue that the source country tax rate works primarely on the selection process, whereas the host-country tax rate affect mainly the magnitude of the FDI, once they occur. We analyze international panel data with 24 OECD countries over the period 1981-1998 by the Heckman selection method to bring evidence in support of this argument. 
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