This paper argues that the large reduction in corporate tax rates and only gradual widening of tax bases in many countries over the last decades are consistent with tougher international competition for foreign direct investment (FDI). To make this point we develop a model in which governments...

Recent evidence suggests that regional economic integration provides an important stimulus not only to trade, but also to FDI. In contrast, the available theory on FDI does not yet provide empirically testable propositions on the effects of concurrent trade and investment liberalisation....

Regional integration is often considered a means to improve member countries’ attractiveness to foreign direct investment (FDI). But regional integration agreements (RIAs) as well as FDI are too diverse to allow for generalized verdicts. Our case studies on Mercosur in Latin America, ASEAN and...

It is often feared that tax competition might lead to a “race to the bottom”. The consequence of a decline of tax rates on capital income would be shrinking capital income tax revenues and difficulties for national governments to perform their usual tasks. The paper analyzes what happened to...

For many years there have been political intentions to harmonize tax rates in Europe. As to capital income taxation, competition is often seen to be especially harmful. Facing a high degree of international capital mobility, every country is expected to reduce its tax rate in order to attract...

The paper analyses the financial structure of German inward FDI. From a tax perspective, intra-company loans granted by the parent should be all the more strongly preferred over equity the lower the tax rate of the parent and the higher the tax rate of the German affiliate. From our study of a...

This paper uses micro-data from the World Bank Investment Climate Surveys 2002-2006 to investigate how foreign ownership and access to external finance affect the likelihood of manufacturers in emerging markets to export and/or import. Applying propensity score matching to control for...

This paper focuses on the role of absorptive capacity in determining whether or not domestic firms benefit from productivity spillovers from FDI using establishment level data for the UK. We allow for different effects of FDI on establishments located at different quantiles of the productivity...

It is a widely held belief that foreign direct investment (FDI) has a positive effect on economic growth. We test this hypothesis by performing convergence regressions derived from a model of endogenous technological change. We estimate the rate of growth in per-capita income, relative to the...

We examine how foreign ownership of a firm affects the variety of goods that the firm exports and the number of countries it trades with. We construct a simple theoretical model of how foreign ownership may affect these extensive margins of exports and take this model to data from Germany, one...