How Does FDI React to Corporate Taxation?

Posted: 31 Aug 2008

See all articles by Agnès Bénassy-Quéré

Agnès Bénassy-Quéré

Paris School of Economics (University Paris 1)

Lionel Gérard Fontagné

Banque de France; CEPII; University of Paris 1 Panthéon Sorbonne; Paris School of Economics

Amina Lahreche-Revil

CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris; University of Amiens; Université Paris I Panthéon-Sorbonne - TEAM

Date Written: 2005

Abstract

Based on a panel of bilateral FDI flows among 11 OECD countries over 1984-2000, we show that, although agglomeration-related factors are strong determinants of FDI, tax differentials also play a significant role in understanding foreign location decisions. We further investigate non-linearities in the impact of tax differentials, and explore the impact of tax schemes. Our results are consistent with the imperfect competition literature which underscores the possibility of tax differentials across countries in equilibrium.

Keywords: Tax competition, Foreign Direct Investment

JEL Classification: F21, H25, H87

Suggested Citation

Benassy-Quere, Agnes and Fontagne, Lionel and Lahreche-Revil, Amina and Lahreche-Revil, Amina, How Does FDI React to Corporate Taxation? (2005). International Tax and Public Finance, Vol. 12, No. 5, 2005, Available at SSRN: https://ssrn.com/abstract=1260868

Agnes Benassy-Quere (Contact Author)

Paris School of Economics (University Paris 1) ( email )

106-112 boulevard de l'Hopital
Paris, F-75013
France
+33 1 44 07 82 19 (Phone)

HOME PAGE: http://www.parisschoolofeconomics.com/benassy-quere-agnes/agnesb.html

Lionel Fontagne

Banque de France ( email )

Paris
France

HOME PAGE: http://www.lionel-fontagne.eu/

CEPII ( email )

9 Rue Georges Pitard
Paris, 75015
France
+33 1 53 68 55 06 (Phone)

HOME PAGE: http://lionelfontagne.weebly.com/

University of Paris 1 Panthéon Sorbonne ( email )

Maison des Sciences Economiques
106-112 Bd de l'Hôpital
Paris, 75013
France
+33 1 44 07 89 94 (Phone)
+33 1 53 68 55 01 (Fax)

HOME PAGE: http://lionelfontagne.weebly.com/

Paris School of Economics ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France
+33 1 44 07 89 94 (Phone)

HOME PAGE: http://lionelfontagne.weebly.com/

Amina Lahreche-Revil

CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris ( email )

9 Rue Georges Pitard
Paris Cedex 15, F-75015
France
+33 1 53 68 55 61 (Phone)
+33 1 53 68 55 03 (Fax)

University of Amiens

Chemin du Thil
80025 Amiens Cedex 1
France

Université Paris I Panthéon-Sorbonne - TEAM

106-112 boulevard de l'hôpital
Cedex 13 Paris, P75647
France

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