International Investment and Tax Agreements and Multinational Activity

Monika Sztajerowska ()
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Monika Sztajerowska: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, CESifo - LMU - Ludwig Maximilian University [Munich] = Ludwig Maximilians Universität München, i-Mip - Institut des Politiques Macroéconomiques et Internationales

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Abstract: International investment agreements (IIAs) and double-taxation treaties (DTT) have spread rapidly over space and time with the aim of increasing cross-border investment. Do they achieve their main purpose? This paper provides novel firm-level evidence on the effects of IIAs and DTTs on the location decisions of multinational enterprises (MNEs) in a multicountry context. It uses unique micro-level data on the location of MNEs' affiliates globally and country-pair data on the coverage and content of treaties over a 20-year period (1990-2010). It finds that investment agreements, in particular those with the investor state dispute settlement (ISDS), increase the probability of MNEs' first foreign entry when they are accompanied by a double-taxation treaty. The effects are particularly strong when MNEs enter a low-quality institutional environment in a sector with high hold-up problems. This interaction between investment and tax treaties can have important policy implications.

Keywords: Multinational Enterprises; International Investment Agreements; Double Taxation Treaties (search for similar items in EconPapers)
Date: 2026-07
New Economics Papers: this item is included in nep-int and nep-pbe
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