Locational power of the corporation tax and the interest rate in highly globalized economy

As firms\u27 activities are expanded to cover the whole world, new mechanism begins to work in a firm\u27s production activity, and some economic elements which were not taken into consideration as a location factor become to influence factory\u27s location selections. The typical examples are a function of the transfer price of intermediate goods in movements between a firm\u27s factories that are located in different countries, and locational effects of the corporation tax and the interest rate which are manipulated by the government and the central bank. This paper analyzes the effects of the corporation tax rates and the interest rates of countries on the location decision of a firm through a transfer price function. This analysis shows that the corporation tax rate and the interest rate direct the spatial area in which location of a factory is prospective and the transfer price level. It will be shown in the analysis that the corporation tax rate and the interest rate intervene into the selection of the country by a manufacturer, furthermore, they play an important role in determination of the location site in the selected country. The analysis will offer a significant suggestion to policy makers in a country that the corporation tax and the interest rate are important location factor when the administration induces firms from foreign countries to vitalize the certain regions