FDI, taxes and agglomeration economies in the EU15
AbstractThis article provides an empirical analysis of the impact of tax differentials and agglomeration economies on Foreign Direct Investment (FDI). The article departs from most previous work on FDI and tax competition in a number of ways. First, it incorporates several measures of agglomeration in order to investigate whether agglomeration economies mitigate the downward spiral in tax rates. As the strength of agglomeration economies may vary with the degree of integration, we use a panel of bilateral FDI flows for a highly integrated region including countries with similar economic structure -- the EU15 -- from 1986 to 2004. Second, the empirical analysis explicitly deals with the problem of selection bias by using the Heckman sample selection approach. Also, by focusing on the EU15, we are able to provide additional information on the determinants of FDI between similar, higher-income countries. The empirical analysis provides some evidence of corporate marginal effective tax rates having an impact on FDI. This result, however, is sensitive to the inclusion of agglomeration economies. In particular, we find both Marshall types of technological externalities and overall concentration of economic activity to have an influence on FDI flows and, moreover, mitigating the negative impact of taxes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 45 (2013)
Issue (Month): 18 (June)
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
Other versions of this item:
- �sa Marie Hansson & Karin Olofsdotter, 2013. "FDI, Taxes and Agglomeration Economies in the EU15," Applied Economics, Taylor & Francis Journals, vol. 45(23), pages 3387-3387, August.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hansson, Åsa & Porter, Susan & Perry Williams, Susan, 2012. "The Effect of Political and Economic Factors on Corporate Tax Rates," Working Paper Series 942, Research Institute of Industrial Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.