Tax Policy and Foreign Direct Investment in the United States

30 Pages Posted: 5 Jul 2004 Last revised: 13 Feb 2023

See all articles by David G. Hartman

David G. Hartman

National Bureau of Economic Research (NBER)

Date Written: August 1982

Abstract

This paper provides some evidence on one aspect of international investment, the impacts of domestic tax policy on foreign direct investment in the United States. The possible impacts, which are discussed in the first section, are complex. For example, an investment incentive which applies to both domestic and foreign investors would be expected to result in an increased foreign investment in the U.S. On the other hand, a savings incentive, which has no direct impact on foreign investors, would nevertheless tend to increase domestic investors' demand for capital assets, thereby driving down the returns expected by foreign investors and possibly resulting in significant decreases in foreign investment. Because of measurement difficulties, we are only partly successful in obtaining precise estimates of this sort of impact. However, the results we do obtain suggest that foreign investment in the U.S. is strongly affected, in the manner predicted, by changes in domestic tax policy.

Suggested Citation

Hartman, David G., Tax Policy and Foreign Direct Investment in the United States (August 1982). NBER Working Paper No. w0967, Available at SSRN: https://ssrn.com/abstract=302544

David G. Hartman (Contact Author)

National Bureau of Economic Research (NBER)

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