Bilateral effective tax rates and foreign direct investment

Egger, Peter; Loretz, Simon; Pfaffermayr, Michael and Winner, Hannes (2009) Bilateral effective tax rates and foreign direct investment. International Tax and Public Finance, 16 (6), pp. 822-849.

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This paper computes effective (marginal and average) tax rates that account for bilateral aspects of taxation and, therefore, vary across country-pairs and years. These tax rates serve to estimate the impact of corporate taxation on outbound stocks of bilateral foreign direct investment (FDI) among OECD countries between 1991 and 2002. The findings indicate that outbound FDI is positively related to the parent and host country tax burden and negatively associated with bilateral effective tax rates. Relying only on unilateral (country and time variant) rather than on both unilateral and bilateral (country-pair and time variant) effective tax rates leads to biased estimates of the impact of corporate taxation on FDI.

Item Type: Article in Academic Journal
Keywords: Corporate taxation; Foreign direct investment; Panel econometrics
Classification Codes (e.g. JEL): H25; H73; F21; F23; C33
Date Deposited: 05 Jun 2015 10:19
Last Modified: 01 Apr 2016 14:19
DOI: 10.1007/s10797-008-9092-x
ISSN: 0927-5940 (print), 1573-6970 (online)

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