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Taxation and the Birth of Foreign Subsidiaries

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  • Hans-Werner Sinn

Abstract

The paper studies the influence of tax policy on foreign direct investment with a particular emphasis on immature subsidiaries. Among other things it shows that taxes on repatriations reduce the subsidiary's "birth weight", that lump sum taxes reduce its cost of capital, and that the possibility of deferral increases this cost. The paper rejects the popular weighted average specification of the subsidiary's cost of capital.

Suggested Citation

  • Hans-Werner Sinn, 1990. "Taxation and the Birth of Foreign Subsidiaries," NBER Working Papers 3519, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3519
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