Are tax rates still decisive in FDI investment choice or what drives sectoral FDI nowadays? *

We explore the eects of eective taxation and institutional quality on sec-toral FDI. Our analysis comprises European countries and we use data from 2002 to 2020. We employ a GMM approach and show that a rise in apparent taxation and tax dierential reduces sectoral FDI ow while soaring tax dierential increases FDI stock. Among the institutional variables, tertiary enrollment attracts FDI and secondary attainment has opposite results depending on the sectoral FDI. Our ndings indicate that government should lower taxation for more FDI ows and strengthen tertiary and secondary enrollment.