Advanced Search
MyIDEAS: Login

Taxes and Location of Foreign Direct Investments: an Empirical Analysys for the European Union Countries

Contents:

Author Info

  • Roberta De Santis

    (ISAE - Institute for Studies and Economic Analyses)

  • Maria Cristina Mercuri

    (ISAE - Institute for Studies and Economic Analyses)

  • Claudio Vicarelli

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

This paper aims at verifying the impact of fiscal variables in the multinational firms' localisation choices within the European Union Member States. In particular, the sensitivity of bilateral foreign direct investments towards EU member countries to the receiving country's fiscal characteristics is tested. Among fiscal variables, the empirical analysis shows that FDI inflows in the European Union countries are influenced by the total fiscal wedge on labour more than the corporate tax rate. This suggests that Multinationals, while making their localisation choices, focus their attention on the overall tax and contribution burden more than on single corporate tax rates, which indeed provide only a partial (even though immediate) information. The estimated elasticities of FDI inflows to fiscal variables suggest that a high-taxation country might draw considerable benefits in terms of FDI through a relatively modest tax rate reduction. This means that not necessarily each Member State must switch to very low tax rates (for example those of Ireland) to obtain an optimal combination between costs (associated to the tax rate reduction) and benefits (linked to the tax base enlargement, i.e. larger FDI flows).

Download Info

If 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.
File URL: http://lipari.istat.it/digibib/Working_Papers/desantis_mercuri_vicarelli24.pdf
Download Restriction: no

Bibliographic Info

Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 24.

as in new window
Length: 33 pages
Date of creation: Nov 2001
Date of revision:
Handle: RePEc:isa:wpaper:24

Contact details of provider:
Postal: Via Cesare Balbo 16, Roma
Phone: +390646732606
Email:
Web page: http://www.istat.it/en/
More information through EDIRC

Related research

Keywords: Foreign Direct Investments; Competitiveness; International Fiscal Issues;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Baldwin, Richard & Forslid, Rikard & Haaland, Jan I., 1995. "Investment Creation and Investment Diversion: Simulation Analysis of the Single Market Programme," CEPR Discussion Papers 1308, C.E.P.R. Discussion Papers.
  2. Paul Brenton & Francesca Di Mauro & Matthias Lücke, 1999. "Economic Integration and FDI: An Empirical Analysis of Foreign Investment in the EU and in Central and Eastern Europe," Empirica, Springer, vol. 26(2), pages 95-121, June.
  3. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
  4. Jonathan Eaton & Akiko Tamura, 1996. "Japanese and U.S. Exports and Investment as Conduits of Growth," NBER Chapters, in: Financial Deregulation and Integration in East Asia, NBER-EASE Volume 5, pages 51-75 National Bureau of Economic Research, Inc.
  5. James R. Markusen & Keith E. Maskus, 2001. "Multinational Firms: Reconciling Theory and Evidence," NBER Chapters, in: Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, pages 71-98 National Bureau of Economic Research, Inc.
  6. Bruce A. Blonigen & Ronald B. Davies, 2004. "The Effects of Bilateral Tax Treaties on U.S. FDI Activity," International Tax and Public Finance, Springer, vol. 11(5), pages 601-622, 09.
  7. Joeri Gorter & A. Parikh, 2000. "How mobile is capital within the European Union?," CPB Research Memorandum 172, CPB Netherlands Bureau for Economic Policy Analysis.
  8. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
  9. Roberta De Santis & Claudio Vicarelli, 2001. "Fattori di attrazione degli investimenti diretti esteri nell’Unione Europea: il ruolo del contesto istituzionale e la competitività dell’Italia," Rivista di Politica Economica, SIPI Spa, vol. 91(3), pages 3-32, March.
  10. Markusen, James R. & Venables, Anthony J. & Eby Konan, Denise & Zhang, Kevin H., 1996. "A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services," Working Paper Series 465, Research Institute of Industrial Economics.
  11. Alan J. Auerbach & Kevin Hassett & Joel Slemrod, 1993. "Taxation and Foreign Direct Investment in the United States: A Reconsideration of the Evidence," NBER Chapters, in: Studies in International Taxation, pages 119-148 National Bureau of Economic Research, Inc.
  12. Torsten Persson & Guido Tabellini, 1990. "The Politics of 1992: Fiscal Policy and European Integration," NBER Working Papers 3460, National Bureau of Economic Research, Inc.
  13. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June.
  14. Alberto Giovannini & R. Glenn Hubbard & Joel Slemrod, 1993. "Studies in International Taxation," NBER Books, National Bureau of Economic Research, Inc, number giov93-1, May.
  15. Gropp, Reint & Kostial, Kristina, 2000. "The disappearing tax base: is foreign direct investment eroding corporate income taxes?," Working Paper Series 0031, European Central Bank.
  16. Reint Gropp & Kristina Kostial, 2000. "The Disappearing Tax Base," IMF Working Papers 00/173, International Monetary Fund.
  17. Brenton, Paul & Di Mauro, Francesca, 1999. "The Potential Magnitude and Impact of FDI flows to CEECs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 59-74.
  18. Michael J. Boskin & William G. Gale, 1986. "New Results on the Effects of Tax Policy on the International Location of Investment," NBER Working Papers 1862, National Bureau of Economic Research, Inc.
  19. James R. Hines, Jr., 1996. "Tax Policy and the Activities of Multinational Corporations," NBER Working Papers 5589, National Bureau of Economic Research, Inc.
  20. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Roberto Basile & Davide Castellani & Antonello Zanfei, 2004. "Location choices of multinational firms in Europe: the role of national boundaries and EU policy," ERSA conference papers ersa04p37, European Regional Science Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:isa:wpaper:24. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stefania Rossetti).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.