This paper examines the influence of foreign factor prices and international corporate taxation on fixed investment in the UK manufacturing sector. The evidence suggests that factor prices affect fixed investment in the UK through their influence on international competitiveness rather than the factor mix decision. There also appears to be a significant effect of tax competitiveness on the rate of investment. Empirical evidence suggests that policy to increase investment be aimed at reducing the average rate rather than the marginal rate of corporation tax.
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Garry Young (1999) studied this question.
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