Effects of Foreign Direct Investment and Trade Openness on Industry and Commerce Tax Revenue: Evidence from Cartagena's Economic Sectors, 2018-2023

Abstract

This study analyzed the effects of foreign direct investment (FDI) and trade openness on Industry and Commerce Tax (ICA) revenue in Cartagena, Colombia, from 2018 to 2023. The research examined seventy-one companies across manufacturing, commerce, services, and logistics sectors. The methodology employed data validation through Augmented Dickey-Fuller tests and Variance Inflation Factor analysis, followed by hypothesis testing using Vector Error Correction Models, Granger causality tests, and panel regression with fixed effects. The results indicated positive relationships between international economic integration measures and ICA revenue generation, with manufacturing and commerce sectors showing stronger responses. The Vector Error Correction Model found long-run equilibrium relationships between variables, while Granger causality tests identified unidirectional influence from FDI to tax revenue. Panel regression analysis determined sector-specific variations in response to international economic integration. The study considered institutional factors and environmental considerations, finding that governance structures mediated the effectiveness of international economic integration. The findings suggested that port city characteristics influenced how FDI and trade openness affected local tax revenue generation. The research faced limitations in data availability and measurement of informal economic activities. The conclusions supported the development of sector-specific approaches to economic integration while highlighting the role of institutional quality in determining outcomes.