Investment decision of fdi firms in Vietnam under uncertainty of carbon taxation

Abstract

The thesis: "Investment decisions of FDI firms in Vietnam under uncertainty of carbon taxation " takes Vietnam as a typical one, aims to study the impact of uncertainties related to the carbon taxation on the investment decision and the choices of capital/technology level and the labor level of the FDI firms into the large asset project (also known as irreversible project) in Vietnam. The thesis focuses on building the theoretical model based on the basic model of corporate profit function (Varian, 1992), reflecting the relationship between firm’s profit and main inputs such as capital/technology (K) and labor (L), and other costs, including carbon taxation costs. Theoretical model was developed using optimization algorithms and simulations using hypothetical approximate data. The thesis provides theoretical findings that the application of carbon taxation has the negative effect that lowering the investment level of the firm, however, at the same time, it also has the positive effect of restricting investors with low technology level and encouraging investors with higher technology level at the same carbon tax rate. Thus, if the carbon tax is used as a regulatory tool, the government may develop policies that will encourage high-tech investors leading to the higher quality of foreign investment in Vietnam.