The Impact of Double Taxation Treaties on Foreign Direct Investment: Evidence from Large Dyadic Panel Data

Contemporary Economic Policy, Vol. 28, No. 3, pp. 366-377, 2010

33 Pages Posted: 18 Aug 2008 Last revised: 7 Nov 2010

See all articles by Fabian Barthel

Fabian Barthel

London School of Economics & Political Science (LSE)

Matthias Busse

Ruhr-University Bochum

Eric Neumayer

London School of Economics and Political Science (LSE)

Multiple version iconThere are 2 versions of this paper

Date Written: May 7, 2009

Abstract

To increase inward foreign direct investment (FDI), policy-makers increasingly resort to the ratification of double taxation treaties (DTTs). However, the effectiveness of DTTs in inducing higher FDI is still open to debate, as the empirical evidence of existing studies is anything but conclusive. In contrast to earlier approaches, we use a largely unpublished dataset on bilateral FDI stocks, covering a much larger and more representative sample of host and source countries. Controlling for standard determinants of FDI and employing various econometric specifications, our results indicate that DTTs do lead to higher FDI stocks and that the effects are substantively important as well.

Suggested Citation

Barthel, Fabian and Busse, Matthias and Neumayer, Eric, The Impact of Double Taxation Treaties on Foreign Direct Investment: Evidence from Large Dyadic Panel Data (May 7, 2009). Contemporary Economic Policy, Vol. 28, No. 3, pp. 366-377, 2010. Available at SSRN: https://ssrn.com/abstract=1234163

Fabian Barthel

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://personal.lse.ac.uk/barthel

Matthias Busse (Contact Author)

Ruhr-University Bochum ( email )

Faculty of Management and Economics, GC 3/145
D-44780 Bochum, DE 44780
Germany

Eric Neumayer

London School of Economics and Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 207 955 7598 (Phone)
+44 207 955 7412 (Fax)

HOME PAGE: http://personal.lse.ac.uk/neumayer

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