A reassessment of UNCTAD’s transnationality indices in the digital economy

Abstract

This research note reassesses UNCTAD’s transnationality indices in light of recent economic trends that are quickly changing the international investment landscape: the digital economy, the new industrial revolution and the resulting asset-light international business models. The recent international “Agreement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy” through the Base Erosion Profit Shifting project emphasizes the importance of fully understanding and correctly interpreting the implications of digitalization for investment and development policy. The analysis shows that UNCTAD’s internationalization indices are still able to capture relevant structural changes but could benefit from several fine-tuning options to allow a clearer interpretation and consequently a better elaboration of policy advice. Relevant policy areas include international taxation, as suggested by the analysis of the FDI lightness index, but also employment and more generally development strategies of host economies.