Tax Structures and FDI: The Deterrent Effects of Complexity and Uncertainty


  • Part of this work was carried out while Mudd was at Thunderbird, the American Graduate School of International Management and he acknowledges its generous support. The authors would like to thank the participants at the Southeast Theory and International Economics conference and the Academy of International Business conference as well as James Alm, Richard Bird and two anonymous referees for valuable comments and suggestions. Any remaining errors and omissions are, of course, entirely the responsibility of the authors.


This paper measures the distortionary and distributional effects of housing subsidies in the Netherlands. Its broad scope allows us to discuss the results in the light of the main justifications for subsidising housing, i.e. the merit–good argument, external effects and the distribution motive. Our measurements reveal some patterns of subsidisation that seem difficult to justify on these grounds. This applies especially to the differences between subsidisation of rental and owneroccupied housing and between mortgage– and equity–financed ownership. Moreover, the inelastic supply of housing in the Netherlands entails that subsidisation has only a limited effect on promoting housing quality.