FDI, taxes and agglomeration economies in the EU15
(2013) In Applied Economics 45(18). p.2653-2664- Abstract
- This paper provides an empirical analysis of the impact of tax differentials and agglomeration economies on foreign direct investment (FDI). The paper departs from most previous work on FDI and tax competition in a number of ways. First, it incorporates several measures of agglomeration in order to investigate whether agglomeration economies mitigate the downward spiral in tax rates. As the strength of agglomeration economies may vary with the degree of integration, we use a panel of bilateral FDI flows for a highly integrated region including countries with similar economic structure–the EU15–from 1986 to 2004. Second, the empirical analysis explicitly deals with the problem of selection bias by using the Heckman sample selection... (More)
- This paper provides an empirical analysis of the impact of tax differentials and agglomeration economies on foreign direct investment (FDI). The paper departs from most previous work on FDI and tax competition in a number of ways. First, it incorporates several measures of agglomeration in order to investigate whether agglomeration economies mitigate the downward spiral in tax rates. As the strength of agglomeration economies may vary with the degree of integration, we use a panel of bilateral FDI flows for a highly integrated region including countries with similar economic structure–the EU15–from 1986 to 2004. Second, the empirical analysis explicitly deals with the problem of selection bias by using the Heckman sample selection approach. Also, by focusing on the EU15, we are able to provide additional information on the determinants of FDI between similar, higher-income countries. The empirical analysis provides some evidence of corporate marginal effective tax rates having an impact on FDI. This result, however, is sensitive to the inclusion of agglomeration economies. In particular, we find both Marshall types of technological externalities and overall concentration of economic activity to have an influence on FDI flows and, moreover, mitigating the negative impact of taxes. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/2493123
- author
- Hansson, Åsa LU and Olofsdotter, Karin LU
- organization
- publishing date
- 2013
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- FDI, corporate tax rates, agglomeration economies, Heckman selection model
- in
- Applied Economics
- volume
- 45
- issue
- 18
- pages
- 2653 - 2664
- publisher
- Routledge
- external identifiers
-
- wos:000321608500012
- scopus:84860120205
- ISSN
- 1466-4283
- DOI
- 10.1080/00036846.2012.665596
- language
- English
- LU publication?
- yes
- id
- 99e5f3ba-7c60-43b0-803d-a740362ae82d (old id 2493123)
- alternative location
- http://www.tandfonline.com/doi/pdf/10.1080/00036846.2012.665596
- date added to LUP
- 2016-04-01 11:00:49
- date last changed
- 2022-03-05 00:59:09
@article{99e5f3ba-7c60-43b0-803d-a740362ae82d,
abstract = {{This paper provides an empirical analysis of the impact of tax differentials and agglomeration economies on foreign direct investment (FDI). The paper departs from most previous work on FDI and tax competition in a number of ways. First, it incorporates several measures of agglomeration in order to investigate whether agglomeration economies mitigate the downward spiral in tax rates. As the strength of agglomeration economies may vary with the degree of integration, we use a panel of bilateral FDI flows for a highly integrated region including countries with similar economic structure–the EU15–from 1986 to 2004. Second, the empirical analysis explicitly deals with the problem of selection bias by using the Heckman sample selection approach. Also, by focusing on the EU15, we are able to provide additional information on the determinants of FDI between similar, higher-income countries. The empirical analysis provides some evidence of corporate marginal effective tax rates having an impact on FDI. This result, however, is sensitive to the inclusion of agglomeration economies. In particular, we find both Marshall types of technological externalities and overall concentration of economic activity to have an influence on FDI flows and, moreover, mitigating the negative impact of taxes.}},
author = {{Hansson, Åsa and Olofsdotter, Karin}},
issn = {{1466-4283}},
keywords = {{FDI; corporate tax rates; agglomeration economies; Heckman selection model}},
language = {{eng}},
number = {{18}},
pages = {{2653--2664}},
publisher = {{Routledge}},
series = {{Applied Economics}},
title = {{FDI, taxes and agglomeration economies in the EU15}},
url = {{http://dx.doi.org/10.1080/00036846.2012.665596}},
doi = {{10.1080/00036846.2012.665596}},
volume = {{45}},
year = {{2013}},
}