FDI and Taxation: A Meta-Study

40 Pages Posted: 7 Mar 2011

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

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Abstract

In this paper we extend former meta-analyses on FDI and taxation in three ways. First, we add 16 recent publications. Second, we code additional meta-regressor variables addressing important issues in research on FDI and taxation. Third, we refer to the sophisticated meta-analytical methodology and present a coherent strategy to choose the meta-regression estimator most suitable for the meta-data at hand. As compared to prior surveys, the meta-analysis is thus based on a much broader methodological basis and a considerably richer meta-data set. The median tax semi-elasticity of FDI based on 704 primary estimates is 2.49 in absolute terms. The precision weighted average of the full sample of semi-elasticities is 2.55, again in absolute terms. Moreover, our meta-analysis shows that there is a publication bias in the primary literature. Meta-regressions show that studies based on aggregate data report systematically larger semi-elasticities than firm-level analyses, that integrating bilateral tax regulations into effective tax rates leads to more effective measurement of adverse tax incentives on foreign investment, and that tax effects are not compensated by public spending.

Keywords: Corporate income taxation, Foreign direct investment, Meta-analysis

Suggested Citation

Feld, Lars P. and Heckemeyer, Jost, FDI and Taxation: A Meta-Study. Journal of Economic Surveys, Vol. 25, No. 2, pp. 233-272, 2011. Available at SSRN: https://ssrn.com/abstract=1777807 or http://dx.doi.org/10.1111/j.1467-6419.2010.00674.x

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

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

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

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Jost Heckemeyer

ZEW – Leibniz Centre for European Economic Research ( email )

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

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