Do Tax Havens Divert Economic Activity?
Mihir A. Desai
Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)
C. Fritz Foley
Harvard Business School; National Bureau of Economic Research (NBER)
James R. Hines Jr.
University of Michigan; NBER
Ross School of Business Paper No. 1024
When multinational firms expand their operations in tax havens, do they divert activity from non-havens? Much of the debate on tax competition presumes that the answer to this question is yes. This paper offers a model for examining the relationship between activity in havens and non-havens, and discusses the implications of recent evidence in light of that model. Properly interpreted, the evidence suggests that tax haven activity enhances activity in nearby non-havens.
Number of Pages in PDF File: 12
Keywords: Tax havens, tax competition, foreign direct investment, investment, multinational firms
JEL Classification: H87, F23, F21
Date posted: April 21, 2005