FDI and Taxation: A Meta-Study

63 Pages Posted: 11 Feb 2009

See all articles by Lars P. Feld

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Jost Heckemeyer

ZEW – Leibniz Centre for European Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: February 1, 2009


Despite the continuing political interest in the usefulness of tax competition and tax coordination as well as the wealth of theoretical analyses, it still remains open whether or when tax competition is harmful. Moreover, the influence of tax differentials on multinationals' decisions is still insufficiently analyzed. Thus, economists have increasingly resorted to empirical analysis in order to gain insights on the elasticity of FDI with respect to company taxation. As a result, the empirical literature on taxation and international capital flows has grown to a similar abundance during the last 25 years as the respective theoretical literature. Its heterogeneity leads to a rising need for concise reviews on the existing empirical evidence. In this paper we extend former meta-analyses on FDI and taxation in three ways. First, we add the most recent publications unconsidered in meta-analyses up-to-date. Second, we apply a different methodology by using a broad set of meta-regression estimators and explicitly discuss which one is most suitable for application to our meta-data. Third, we address some important issues in research on FDI and taxation to the clarification of which meta-analysis can make valuable contributions. These issues are mainly: The influence of variables which might moderate effects of tax differentials (e.g. public spending), the implications of using aggregate FDI data as opposed to firm-level information on measured tax effects, the implications of bilateral effective tax rates, and the possible presence of publication bias in primary research.

Keywords: corporate income taxation, foreign direct investment, meta analysis

JEL Classification: H25, H73, F23, F21

Suggested Citation

Feld, Lars P. and Heckemeyer, Jost, FDI and Taxation: A Meta-Study (February 1, 2009). CESifo Working Paper Series No. 2540. Available at SSRN: https://ssrn.com/abstract=1340388

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679

Jost Heckemeyer

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034

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