The Effects of Bilateral Tax Treaties on U.S. FDI Activity

Bruce A. Blonigen and Ronald Davies ()

No 7929, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The effects of bilateral tax treaties on FDI activity have been unexplored, despite significant ongoing activities by countries to negotiate and ratify these treaties. This paper estimates the impact of bilateral tax treaties using both U.S. inbound and outbound FDI over the period 1966-1992. Our estimates suggest a statistically significant average annual increase of FDI activity for each additional year of a treaty which ranges from 2% to 8%, depending on the FDI activity measure and empirical framework we employ. Examination for nonlinear effects of treaty age on FDI activity suggests that while treaties have an immediate impact on FDI flows, there is a substantial lag before treaty adoption positively affects FDI stocks and affiliate sales. Finally, our results suggest that bilateral tax treaties have an effect on investment outside of the withholding tax rates they alter, which may include the commitment and risk reduction effects of these treaties.

JEL-codes: F21 F23 (search for similar items in EconPapers)
Date: Written 2000-10
Note: ITI PE
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w7929.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: The Effects of Bilateral Tax Treaties on U.S. FDI Activity (2001)
Journal Article: The Effects of Bilateral Tax Treaties on U.S. FDI Activity (2004)
Journal Article: The Effects of Bilateral Tax Treaties on U.S. FDI Activity (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7929
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().