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The impact of taxes and public spending on the location of FDI: evidence from FDI-flows within Europe

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  • Buettner, Thiess

Abstract

In a place to place analysis of bilateral FDI flows the average company tax burden, the statutory corporation tax rate, as well as the cost of capital are used to capture the tax incentives. In addition, indicators of public spending in general and with regard to different functions of government and rankings of competitiveness related to public sector activities are used to measure the role of public service provision. The results show significant effects of tax incentives, in particular, the marginal tax burden and the statutory tax rate prove jointly significant. However, only weak indications of a countervailing effect of public expenditures are found. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-17.

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Date of creation: 2002
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Handle: RePEc:zbw:zewdip:880

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  1. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number wbsle.
  2. Ulrich Schreiber & Christoph Spengel & Lothar Lammersen, 2002. "Measuring The Impact Of Taxation On Investment And Financing Decisions," Schmalenbach Business Review (sbr), LMU Munich School of Management, LMU Munich School of Management, vol. 54(1), pages 2-23, January.
  3. Carlin, Wendy & Glyn, Andrew & Van Reenen, John, 2001. "Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(468), pages 128-62, January.
  4. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
  5. Devereux, Michael P. & Pearson, Mark, 1995. "European tax harmonisation and production efficiency," European Economic Review, Elsevier, Elsevier, vol. 39(9), pages 1657-1681, December.
  6. Alfons Weichenrieder, 1996. "Fighting international tax avoidance," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 37-58, February.
  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. Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers, Institute for Fiscal Studies W96/14, Institute for Fiscal Studies.
  9. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
  10. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1076-94, December.
  11. Julie Collins & Douglas Shackelford, 1995. "Corporate domicile and average effective tax rates: The cases of Canada, Japan, the United Kingdom, and the United States," International Tax and Public Finance, Springer, Springer, vol. 2(1), pages 55-83, February.
  12. Michael Devereux & Harold Freeman, 1995. "The impact of tax on foreign direct investment: Empirical evidence and the implications for tax integration schemes," International Tax and Public Finance, Springer, Springer, vol. 2(1), pages 85-106, February.
  13. Michael Devereux & Rachel Griffith, 1998. "The taxation of discrete investment choices," IFS Working Papers, Institute for Fiscal Studies W98/16, Institute for Fiscal Studies.
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Cited by:
  1. Wolf Wagner & Sylvester Eijffinger, 2008. "Efficiency of capital taxation in an open economy: tax competition versus tax exportation," International Tax and Public Finance, Springer, Springer, vol. 15(6), pages 637-646, December.
  2. Ruud A. de Mooij & Sjef Ederveen, 2008. "Corporate Tax Elasticities A Reader’s Guide to Empirical Findings," Working Papers, Oxford University Centre for Business Taxation 0822, Oxford University Centre for Business Taxation.
  3. Lars P. Feld & Jost H. Heckemeyer, 2011. "Fdi And Taxation: A Meta‐Study," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 25(2), pages 233-272, 04.
  4. Timothy Goodspeed & Jorge Martinez-Vazquez & Li Zhang, 2009. "Public Policies and FDI Location: Differences between Developing and Developed Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0910, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  5. Ruud A. de Mooij & Sjef Ederveen, 2005. "Explaining the Variation in Empirical Estimates of Tax Elasticities of Foreign Direct Investment," Tinbergen Institute Discussion Papers 05-108/3, Tinbergen Institute.
  6. Michael P Devereux, 2007. "The Impact of Taxation on the Location of Capital, Firms and Profit: a Survey of Empirical Evidence," Working Papers, Oxford University Centre for Business Taxation 0702, Oxford University Centre for Business Taxation.
  7. Wolff, Guntram B., 2006. "Foreign direct investment in the enlarged EU: do taxes matter and to what extent?," Discussion Paper Series 1: Economic Studies 2006,13, Deutsche Bundesbank, Research Centre.
  8. Ruud A. de Mooij & Sjef Ederveen, 2006. "What a difference does it make? Understanding the empirical literature on taxation and international capital flows," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 261, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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