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| Content Provider | Springer Nature Link |
|---|---|
| Author | Wolff, Guntram B. |
| Copyright Year | 2007 |
| Abstract | Foreign direct investment is of increasing importance in the European Union. This paper estimates the effect of taxes on foreign direct investment (FDI) flows and on three sub-components of these flows for the countries of the enlarged European Union. The model in the spirit of gravity equations robustly explains FDI flows between the 25 member states. Sample selection needs to be addressed in the estimation. We show that the different subcomponents of FDI should and indeed do react differently to taxes. After controlling for unobserved country characteristics and common time effects, the top statutory corporate tax rate of both, source and host country, turn insignificant for total FDI and investment into equity. However, high source country taxes clearly increase the probability of firms to re-invest profits abroad and lower the percentage of debt financed FDI. This might reflect profit re-allocation to avoid taxes. Market size factors have the expected signs. |
| Starting Page | 327 |
| Ending Page | 346 |
| Page Count | 20 |
| File Format | |
| ISSN | 09237992 |
| Journal | Open Economies Review |
| Volume Number | 18 |
| Issue Number | 3 |
| e-ISSN | 1573708X |
| Language | English |
| Publisher | Kluwer Academic Publishers-Plenum Publishers |
| Publisher Date | 2007-05-08 |
| Publisher Place | New York |
| Access Restriction | One Nation One Subscription (ONOS) |
| Subject Keyword | Foreign direct investment FDI Corporate taxes Fixed set-up costs Sample selection model Development Economics International Economics |
| Content Type | Text |
| Resource Type | Article |
| Subject | Economics and Econometrics |
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