How does FDI React to Fiscal Policy? The Case of Romania

By analysing the evolution of FDI in Romania during 2007-2011, the present paper try to highlight some of the challenging aspects related to the fiscal policy and FDI relation from the viewpoint of the sustainable development requirements for Romania's economy and of increasing its performance with respect to convergence and competitiveness after its EU integration. In this purpose the paper focuses on two different fiscal tools for influencing a foreign investor's location decision, i.e. corporate tax rate and/or provision of public inputs. The paper provides a new perspective on the issue of why FDI are attracted or not by the emergent countries. The study is based on the hypothesis that the competition among countries for attracting FDI does not represent the final goal, but a means for sustainable development and economic-social welfare. In this perspective, the final objective of the paper is the answer to the following question: “Under what conditions Romania will win in the competition for FDI with other (asymmetric) country?”.