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Does Corporate Taxation Deter Multinationals? Evidence from a Historic Event in Ireland

Author

Listed:
  • Holger Görg
  • Eric Strobl

Abstract

type="main" xml:id="twec12240-abs-0001"> We use a unique exogenous corporate tax policy change in the Republic of Ireland to investigate how corporate taxation affects foreign direct investment at the extensive and intensive margin. To this end, we construct exhaustive sectoral and plant level panel data and use difference-in-differences strategies. Our results do not provide strong evidence that the increase in corporate tax rates for exporters did affect the entry or exit of plants from the US or UK in Ireland. Entry rates of German firms seem to be negatively affected, however. At the intensive margin, there is evidence that foreign plants in Ireland reduce the size of their operations in response to the tax change.

Suggested Citation

  • Holger Görg & Eric Strobl, 2015. "Does Corporate Taxation Deter Multinationals? Evidence from a Historic Event in Ireland," The World Economy, Wiley Blackwell, vol. 38(5), pages 788-804, May.
    • Handle: RePEc:bla:worlde:v:38:y:2015:i:5:p:788-804
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    File URL: http://hdl.handle.net/10.1111/twec.2015.38.issue-5
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    Cited by:

    1. Ronald B. Davies & Iulia Siedschlag & Zuzanna Studnicka, 2021. "The impact of taxes on the extensive and intensive margins of FDI," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(2), pages 434-464, April.
    2. Jean Acheson & Rory Malone, 2020. "Respect Your Elders: Evidence from Ireland’s R&D Tax Credit Reform," The Economic and Social Review, Economic and Social Studies, vol. 51(1), pages 105-131.
    3. Görg, Holger, 2023. "Drivers and extent of foreign direct investment in Sub-Sahara Africa," KCG Policy Papers 9, Kiel Centre for Globalization (KCG).

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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