Multinational Investment in Developing Countries: A Study of Taxation and Nationalization

220 Pages·1991·1.18 MB·English

by  Thoma Andersson

Multinational investment in
developing countries

Multinational investment in
developing countries
A study of taxation and nationalization

Thomas Andersson

London and New York
First published 1991 by Routledge
11 New Fetter Lane, London EC4P 4EE

This edition published in the Taylor & Francis e-Library, 2003.

Simultaneously published in the USA and Canada
by Routledge
a division of Routledge, Chapman and Hall, Inc.
29 West 35th Street, New York, NY 10001

© 1991 Thomas Andersson
All rights reserved. No part of this book may be
reprinted or reproduced or utilized in any form or
by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying
and recording, or in any information storage or
retrieval system, without permission in writing from
the publishers.

British Library Cataloguing in Publication Data
Andersson, Thomas, 1959–
Multinational investment in developing countries: a study
of taxation and nationalization.
1. Developing countries: foreign investment.
Multinational companies
I. Title
332.67314

ISBN 0-203-01162-7 Master e-book ISBN

ISBN 0-203-16143-2 (Adobe eReader Format)
ISBN 0-415-06219-5 (Print Edition)

Library of Congress Cataloging-in-Publication Data
Andersson, Thomas.
Multinational investment in developing countries: a study of
taxation and nationalization/Thomas Andersson.
p. cm.
Includes bibliographical references and index.
ISBN 0-415-06219-5
1. Investments, Foreign-Developing countries. 2. International
business enterprises-Taxation-Developing countries. I. Title.
HG5993.A57 1991
336.24 ¢3–dc20 90–27021
CIP
To my parents

Contents
List of figures xi
List of tables xiii
Acknowledgements xv
Part I Introduction
1 Statement of the issues 3
Introduction 3
The history of foreign property rights 7
Multinational enterprise-host country relations from the
late 1960s 12
The flow of direct investment 15
Summary and outline of the book 17
2 Theoretical background 23
Introduction 23
The nature of direct investment 24
The socio-economic impact on host countries 26
The basic motivation of multinational enterprises and
host countries 29
Behavioural options of multinational enterprises and
host countries 33
Direct and indirect effects 35
The theory of the obsolescing bargain 39
The market for direct investment 40
Summary 44
Part II Taxation of multinational enterprise affiliates
3 Taxation of multinational enterprise affiliates by
competing host countries 49
vii
viii Contents
Introduction 49
The game 51
Model 1: Non-deferrable production 54
Model 2: Production at any time 59
Model 3: Investment incentives offered by two identical
countries 62
Model 4: Investment incentives offered by dissimilar
countries 65
Comparison of the model results 70
Concluding remarks 72
4 Foreign exchange versus pollution 75
Introduction 75
Pollution intensive activities and direct investment 76
Bargaining with environmental protection 78
The pattern of direct investment 81
Factors affecting the model results 84
Summary and conclusions 87
Part III Nationalization of multinational enterprise affiliates
5 Nationalization of multinational enterprise affiliates by
competing host countries 91
Introduction 91
Direct and indirect costs of nationalization 93
Mixed strategy equilibrium 99
Framework of two-country competition 102
Two-country equilibrium 106
Determinants of nationalization 111
Summary and conclusions 114
6 Cross-country variation in nationalization 117
Introduction 117
The empirical record 118
Theoretical framework 123
Data 126
Hypotheses and variables 128
The probit model 130
Results of the probit model 131
Binomial model and estimation 133
Results of the binomial model 136
Conclusions 144
Contents ix
7 Duration of nationalization 147
Introduction 147
Previous explanations for the termination 148
New hypotheses 156
Data, duration model and estimation 160
Results 161
Concluding remarks 164
Part IV Conclusion and policy implications
8 Conclusions 169
Introduction 169
Implications for empirical studies 170
Policy implications 172
Notes 177
References 184
Index 192