The Impact of Taxes on the Extensive and Intensive Margins of FDI
Ronald Davies (),
Iulia Siedschlag () and
Zuzanna Studnicka ()
No 201608, Working Papers from School of Economics, University College Dublin
The design of optimal tax policy, especially with respect to attracting FDI, hinges on whether taxes affect multinational firms at the extensive or the intensive margins. Nevertheless, the literature has not yet explored the simultaneous impact of taxation on FDI on these two margins. Using firm-level cross-border investments into Europe during 2004-2013, we do so with a Heckman two-step estimator, an approach which also allows us to endogenize the number of investments and include home country and parent firm characteristics. We find that taxes affect both margins, particularly for firms that invest only once, with 92 percent of tax-induced changes in aggregate inbound FDI driven by movements at the extensive margin. In addition, we find significant effects of both home country and parent firm characteristics, pointing towards the granularity of investment decisions.
Keywords: Foreign direct investment; Taxation; Extensive margin; Intensive margin (search for similar items in EconPapers)
JEL-codes: F14 F23 H25 (search for similar items in EconPapers)
Pages: 44 pages
New Economics Papers: this item is included in nep-acc, nep-bec and nep-int
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://hdl.handle.net/10197/7861 First version, 2016 (application/pdf)
Journal Article: The impact of taxes on the extensive and intensive margins of FDI (2021)
Working Paper: The Impact of Taxes on the Extensive and Intensive Margins of FDI (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:201608
Access Statistics for this paper
More papers in Working Papers from School of Economics, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Nicolas Clifton ().