We develop a dynamic general equilibrium framework with firm heterogeneity and monopsonistic labour markets, for quantification of the impact of trade and FDI liberalisation episodes. Firms make standard extensive margin investment choices into exporting and multinational statuses. The labour...

This paper analyzes how exporters are affected by corporate tax reforms in destination markets. We introduce tax policy in a trade model of multi-product firms and show that producers face tougher competition in export markets with lower corporate tax rates. This competitive effect induces firms...

Theory recommends aligning the tax treatment of debt and equity. A few countries, notably Belgium, have introduced an allowance for corporate equity (ACE) to achieve tax neutrality. We study the effects of adopting an ACE on debt financing, passive investment, and active investment of...

Patent boxes have been heavily debated for their role in corporate tax competition. This paper uses firm-level data for the period 2000-2011 for the top 2,000 corporate research and development (R&D) investors worldwide to consider the determinants of patent registration across a large sample of...

The OECD in its BEPS action plan 4 addresses tax base erosion by profit shifting through the use of tax deductible interest payments. Their main concern is interest deductions between outbound and inbound investment by groups. Studies of multinational firms show that the tax sensitivity of debt...

This paper develops a model of a monopolistically competitive industry with extensive and intensive business investment and shows how these margins respond to changes in average and marginal corporate tax rates. Intensive investment refers to the size of a firm's capital stock. Extensive...

This paper studies corporate taxation in a model where foreign investment of firms may affect the profitability of the investor firm's domestic activities. In this framework, corporate taxes distort the quality, not just the quantity of foreign direct investment flows. High-tax countries may see...

In this paper, we analyze tax competition in a model where investor firms have the choice between two types of investment, greenfield investment and mergers and acquisitions. We show that the coexistence of these two types of investment intensifies tax competition in comparison to the case where...

Recent empirical studies find that foreign direct investment (FDI) by a multinational firm is not associated with a reduction of the firm’s domestic activities. As it is often argued, this finding may imply that a country should not tax the firm’s foreign profit income since this reduces...

If conventional instruments of strategic trade policy are unavailable, the system of foreign profit taxation and transfer price guidelines may serve as surrogate policy instruments. In this paper, I consider a model where firms from two countries compete with each other on a third market. I...