Incentives and Investments : Evidence and Policy Implications

This paper analyzes how investment incentives may or may not be used to foster private investment, particularly in developing countries. As practitioners and policymakers can attest, political economy exerts a powerful influence on incentives. Many...

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Bibliographic Details
Main Author:	James, Sebastian
Format:	Report
Language:	English en_US
Published:	World Bank, Washington, DC 2017
Subjects:	ACCELERATED DEPRECIATION AMOUNT OF CAPITAL AUDITS BARRIERS TO INVESTMENT BUDGETING BUSINESS CLIMATES BUSINESS DEVELOPMENT BUSINESS ENVIRONMENT CAPITAL BASE CAPITAL FLIGHT CAPITAL FORMATION CAPITAL INVESTMENT CHECKS COMPETITIVE MARKETS COMPETITIVENESS CORPORATE INCOME TAX CORPORATE TAX CORPORATE TAX RATE CORPORATE TAX RATES COST OF CAPITAL COST STRUCTURES COUNTRY FIXED EFFECTS CURRENCY DECISION MAKING DEDUCTIONS DEPRECIATION ALLOWANCES DERIVATIVE DEVELOPING COUNTRIES DEVELOPING ECONOMIES DIFFERENTIAL TAXATION DOMESTIC CAPITAL DOMESTIC MARKET DOMESTIC MARKETS DOUBLE TAXATION ECONOMIC CRITERIA ECONOMIC PERFORMANCE ECONOMIC REFORMS EFFECTIVE TAX RATES ELASTICITY ENFORCEMENT OF CONTRACTS ENVIRONMENTAL ISSUES EQUIPMENT EXCLUSION EXPENDITURE EXPENDITURES EXPORT MARKET EXPORT MARKETS EXPORT PROCESSING ZONES EXPORT SUBSIDIES EXPORTERS EXPORTS FEDERAL BUDGET FINANCE CONSTRAINTS FINANCE CORPORATION FINANCIAL STATEMENTS FISCAL POLICY FIXED ASSETS FLAT TAX FOREIGN DIRECT INVESTMENT FOREIGN INVESTMENT FRAUD GDP GOOD INVESTMENT CLIMATE GOVERNMENT REVENUE HOME COUNTRY HOST COUNTRIES IMPORT DUTY EXEMPTIONS INCENTIVE REGIMES INCENTIVE STRUCTURE INCOME INCOME TAX INCOME TAX RATE INFLATION INFRASTRUCTURE PROJECTS INTERNATIONAL BUSINESS INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INVESTING INVESTMENT ALLOWANCES INVESTMENT BEHAVIOR INVESTMENT CLIMATE INVESTMENT CLIMATE CONDITIONS INVESTMENT CLIMATES INVESTMENT DECISIONS INVESTMENT ENVIRONMENT INVESTMENT GROWTH INVESTMENT INCENTIVES INVESTMENT PROCESS INVESTMENT PROMOTION INVESTMENT RETURNS INVESTMENT TAX CREDIT INVESTMENT TAX CREDITS JOB CREATION JURISDICTION JURISDICTIONS LAFFER CURVE LEGAL PROTECTIONS LEVEL PLAYING FIELD LIQUIDITY LOCAL ECONOMIES LOCAL ECONOMY LOSS OF REVENUE MACROECONOMIC CONDITIONS MACROECONOMIC DATA MACROECONOMIC ENVIRONMENT MACROECONOMIC INSTABILITY MACROECONOMIC POLICIES MARGINAL COST MARGINAL TAX RATES MARKET FAILURES MARKET INEFFICIENCIES MICRODATA MIDDLE INCOME COUNTRIES MONETARY FUND MONETARY POLICY MULTINATIONAL COMPANIES MULTINATIONAL CORPORATION MULTINATIONAL CORPORATIONS MULTIPLIER EFFECTS NATURAL RESOURCES OPPORTUNITY COSTS OUTSOURCING PER CAPITA INCOME PERC POLITICAL ECONOMY POLITICAL REGIME POLITICAL STABILITY POLLUTION POSITIVE EFFECTS POSITIVE EXTERNALITIES POTENTIAL INVESTORS PRICE DISTORTIONS PRIVATE INVESTMENT PRIVATE INVESTORS PUBLIC FINANCE PUBLIC FUNDS PUBLIC GOOD PUBLIC-PRIVATE PARTNERSHIPS RAPID ECONOMIC GROWTH REGULATORY FRAMEWORK RENT SEEKING RETURN RULE OF LAW SAVINGS SINGLE TAX STATEMENTS STATUTORY TAX RATES TAX TAX ADMINISTRATION TAX AUDITS TAX BASE TAX BASES TAX BENEFITS TAX BREAKS TAX BURDENS TAX CODE TAX COLLECTIONS TAX COMPETITION TAX COMPLIANCE TAX CONCESSIONS TAX CREDIT TAX EVASION TAX EXEMPTION TAX EXEMPTIONS TAX EXPENDITURE TAX EXPENDITURES TAX HAVENS TAX INCENTIVE TAX INCENTIVES TAX LAW TAX LAWS TAX LIABILITIES TAX LIABILITY TAX PAYMENTS TAX POLICY TAX RATE TAX RATES TAX REGIME TAX RETURNS TAX REVENUE TAX REVENUES TAX SIMPLIFICATION TAX SYSTEM TAXPAYERS TECHNICAL ASSISTANCE TELECOMMUNICATIONS TRANSFER TAX TRANSPARENCY UNEMPLOYMENT USE TAX VALUE ADDED WEALTH WTO
Online Access:	http://documents.worldbank.org/curated/en/945061468326374478/Incentives-and-investments-evidence-and-policy-implications http://hdl.handle.net/10986/27875

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Summary:	This paper analyzes how investment incentives may or may not be used to foster private investment, particularly in developing countries. As practitioners and policymakers can attest, political economy exerts a powerful influence on incentives. Many incentives especially generous ones have persisted because of lobbying by special interests and politicians' need to curry favor. Yet little research has been done on how political economy affects incentive policy. Second, the paper sheds light on the role that political economy plays in the popularity of incentives and the related shortcomings. Incentives are sometimes used to dole out favors to investors, so investors who benefit from incentives resist attempts to eliminate them. This paper suggests a way to tackle such problems. Third, the paper compiles good practices on managing and administering incentives in developing countries, drawing on government and private sector experiences. Finally, the paper provides policymakers with a framework for analyzing the efficacy of investment incentives based on the sector and level of development involved, and suggests reforms for moving toward best practice.

Incentives and Investments : Evidence and Policy Implications

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