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Taxation on Fixed Foreign Direct Investment and International Commodity Trade as a Potential Protector
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- Authors
- Issue Date
- 1998-04
- Citation
- Seoul Journal of Economics, Vol.11 No.2, pp. 223-242
- Keywords
- FDI ; capital-exporting counter ; FDI tax rate
- Abstract
- This paper presents a model to explain why foreign direct investment (FDI) is possible even in the closed loop game where no precommitment on future FDI tax rate is available. Using a simple two-period model, we explain how international commodity trade between the capital-exporting country and the capital-importing country can be a passive leverage to protect the fixed FDI from being confiscated. We derive the necessary and sufficient conditions to guarantee an interior FDI tax rate in the closed loop game.
- ISSN
- 1225-0279
- Language
- English
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