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

Bruce Blonigen and Ronald Davies

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

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. Robust to a wide variety of alternative specifications, we find no evidence that bilateral tax treaties increase FDI activity, contrary to OECD-stated goals for such treaties. In fact, our estimates suggest that for our sample there may instead be economically and statistically significant negative effects of new bilateral tax treaties on U.S. outbound activity to the tax treaty partner country. These findings are consistent with claims that tax treaties are not intended to improve capital flows, but rather to reduce tax evasion through transfer pricing practices or otherwise.

Keywords: Foreign direct investment; tax treaties; multinational corporations. (search for similar items in EconPapers)
JEL-codes: F21 F23 H25 (search for similar items in EconPapers)
Pages: 30
Date: 2001-01-01, Revised 2001-01-01
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http://economics.uoregon.edu/papers/UO-2001-14_Blonigen_Bilateral_FDI.pdf (application/pdf)

Related works:
Journal Article: The Effects of Bilateral Tax Treaties on U.S. FDI Activity (2004)
Working Paper: The Effects of Bilateral Tax Treaties on U.S. FDI Activity (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ore:uoecwp:2001-14

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