Journal Article

Foreign direct investment, tax competition and social expenditure


  • Görg
  • H.
  • Molana
  • H.
  • Montagna
  • C.
Publication Date

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that redistributive social welfare state policies are valued by multinationals as, for instance, they may signal a government’s commitment to social stability.

Kiel Institute Expert


JEL Classification

Key Words

  • ausländische Direktinvestitionen
  • foreign direct investment
  • Social Policy
  • Tax Competition