This study explores how relative skilled-wage premia affect FDI. Contrary to previous studies based on factor endowment differences, we find strong support for vertical FDI, in the sense that more FDI is conducted in countries where unskilled labor is relatively cheap. In addition, we find t hat...

We use a unique firm-level panel data set of multinational parents and their foreign affiliates to analyze whether profits are shared across borders within multinational firms. Using both fixed-effects and generalized method-of-moments estimators, affiliate wage levels are estimated to respond...

Recent research in international economics highlights the role of interdependencies of investment decisions and sales of multinational firms. Previous work focused on and provided evidence for aggregate flows or stocks of foreign direct investment, showing that interdependence declines in...

In this paper we explore the relationship between the size of a country, the size of its cities, and the economic performance of the country. In order to do this we integrate three different literature, namely the literature on optimal country size, literature on historical processes of...

Bilateral investment treaties (BITs) have proliferated over the past 50 years such that the number of pairs of countries with BITs is roughly as large as the number of country-pairs that belong to bilateral or regional preferential trade agreements (PTAs). The purpose of this study is to provide...

This paper investigates the transfer pricing risk awareness of multinational firms using cross-sectional data of more than 350 firms located in 24 countries and classified in 12 industries. Moving beyond the sole tax optimization motives of multinational firms, we extend the existing literature...

This paper uses a dataset on the foreign activities by Swedish manufacturing firms to examine the performance of German affiliates compared with affiliates in other locations. It is found that German affiliates, on average, have higher labour productivity, R&D expenditure per employee and...

The crisis on international financial markets that started in 2007 has shown the potential links between the financial sector and the real economy. Exports and foreign direct investment (FDI) have declined, presumably not only because of a lack of demand, but also because of restricted access of...

This paper analyzes the tax haven investment behavior of multinational firms from a country that exempts foreign income from taxation. High foreign tax rates generally encourage firms to invest in tax havens, though significant costs of reallocating taxable income dampen these incentives. The...