Common sense says businesses, driven by profits, will go where they can make the most by paying the least.
Three researchers, Dr Holger Görg from GEP (the Globalisation and Economic Policy Centre, University of Nottingham ) and Professor Hassan Molana and Dr Catia Montagna from the University of Dundee, disagree.
After analyzing data from 18 countries over a 14 year period, the team found that the countries which attracted the highest levels of foreign investment were the ones with higher taxes and higher public social expenditure as a proportion of GDP.
Dr Görg, Associate Professor and Reader in Economics at GEP, said:
"The results may be startling and appear to be counterintuitive.
"Most economists have always argued that globalisation leads to a ‘race-to-th