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Exports, Foreign Direct Investment and the Costs of Corporate Taxation

  • Christian Keuschnigg

    ()

    (University of St.Gallen (IFF-HSG), CEPR and CESifo)

This paper develops a model of a monopolistically competitive industry with extensive and intensive business investment and shows how these margins respond to changes in average and marginal corporate tax rates. Intensive investment refers to the size of a firm’s capital stock. Extensive investment refers to the firm’s production location and reflects the trade-off between exports and foreign direct investment as alternative modes of foreign market access. The paper derives comparative static effects of the corporate tax and shows how the cost of public funds depends on the measures of effective marginal and average tax rates and on the behavioral elasticities of extensive and intensive investment.

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File URL: http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Working_Papers/Series_07/WP0708.pdf
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Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0708.

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Date of creation: 2007
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Handle: RePEc:btx:wpaper:0708
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  1. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  3. Ruud A. de Mooij & Sjef Ederveen, 2001. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," CESifo Working Paper Series 588, CESifo Group Munich.
  4. Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers W96/14, Institute for Fiscal Studies.
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  8. Grossman, Gene M. & Helpman, Elhanan & Szeidl, Adam, 2006. "Optimal integration strategies for the multinational firm," Journal of International Economics, Elsevier, vol. 70(1), pages 216-238, September.
  9. Gene M. Grossman & Elhanan Helpman, 2002. "Managerial Incentives and the International Organization of Production," Harvard Institute of Economic Research Working Papers 1987, Harvard - Institute of Economic Research.
  10. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2005. "Welfare Reform in European Countries: A Microsimulation Analysis," OECD Social, Employment and Migration Working Papers 28, OECD Publishing.
  11. Ronald B. Davies, 2004. "Tax Treaties and Foreign Direct Investment: Potential versus Performance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(6), pages 775-802, November.
  12. Christian Keuschnigg, 2007. "Exports, Foreign Direct Investment and the Costs of Corporate Taxation," Working Papers 0708, Oxford University Centre for Business Taxation.
  13. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," NBER Working Papers 12091, National Bureau of Economic Research, Inc.
  14. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-94, December.
  15. Kleven, Henrik & Kreiner, Claus Thustrup, 2006. "The Marginal Cost of Public Funds: Hours of Work versus Labor Force Participation," CEPR Discussion Papers 5594, C.E.P.R. Discussion Papers.
  16. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  17. Thiess Buettner & Georg Wamser, 2009. "The impact of nonprofit taxes on foreign direct investment: evidence from German multinationals," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 298-320, June.
  18. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  19. Gordon, Roger H. & Hines, James Jr, 2002. "International taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 28, pages 1935-1995 Elsevier.
  20. Christian Keuschnigg, 1998. "Investment Externalities and a Corrective Subsidy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(4), pages 449-469, October.
  21. Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate tax systems and cross country profit shifting," Munich Reprints in Economics 20419, University of Munich, Department of Economics.
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  23. Büttner, Thiess & Ruf, Martin, 2004. "Tax Incentives and the Location of FDI: Evidence from a Panel of German Multinationals," ZEW Discussion Papers 04-76, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  24. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers 11471, National Bureau of Economic Research, Inc.
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  26. European Commission, 2001. "Company Taxation in the Internal Market," Taxation Studies 0005, Directorate General Taxation and Customs Union, European Commission.
  27. Christian Keuschnigg & Martin Dietz, 2007. "A growth oriented dual income tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 191-221, April.
  28. repec:rus:hseeco:122439 is not listed on IDEAS
  29. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(2), pages 107-26, March.
  30. Janeba, Eckhard, 1997. "International Tax Competition," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 1, number urn:isbn:9783161467967, May.
  31. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
  32. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July.
  33. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
  34. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
  35. Fuest, Clemens, 2005. "Economic integration and tax policy with endogenous foreign firm ownership," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1823-1840, September.
  36. Bev Dahlby, 2008. "The Marginal Cost of Public Funds: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042509, March.
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