How important are differences in corporate taxation for the investment decisions of multinational enterprises (MNEs)? Over the past decade, interest in this issue has been growing in parallel with the increasing mobility of capital and internationalisation of businesses. Standard models of the MNEs predict that corporate taxation can influence foreign direct investment (FDI) by creating a wedge between the pre- and post-tax returns on investment. The relevant tax wedge, however, depends on whether MNEs’ investment is incremental or involves the creation of entirely new plants.

This paper assesses the importance of taxation on foreign direct investment contributing to the literature in two ways. First, it relates bilateral FDI among OECD countries over the 1990s to a new set of estimates of corporate tax wedges that include many relevant aspects of FDI taxation. Second, it controls for a large set of additional policy and non-policy factors that may affect the attractiveness of a country for foreign investors. Furthermore, the empirical approach is novel in that it focuses on a semi-parametric estimation methodology that accounts for a number of unobserved effects possibly impinging on the choice of investment location by multinational enterprises. Consistent with previous findings, the estimation results suggest that corporate taxation has a non-negligible impact on FDI location choices. However, the results suggest that focusing only on taxation in home and host countries and omitting other policies (such as border policies and labour and product market settings) may lead to a serious overestimation of tax elasticities and their relevance for policy.

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This paper assesses the importance of border and non-border policies for global economic integration. The focus is on four widely-advocated policies: removing explicit restrictions to trade and FDI; promoting domestic competition; improving the adaptability of labour markets; and ensuring adequate levels of infrastructure capital. The analysis covers FDI and trade in both goods and services, thus aiming to account for the most important channels of globalisation and dealing with most modes of cross-border services supply. The results highlight that, despite extensive liberalisation over the past two decades, there is scope for further reducing policy barriers to integration of OECD markets. Remaining barriers have a significant impact on bilateral trade and FDI, with anticompetitive domestic regulations and restrictive labour market arrangements estimated to curb integration as much as explicit trade and FDI restrictions. Simulating the removal of such barriers suggests that the quantitative effects of further liberalisation of trade, FDI and domestic product and labour markets on global integration could be substantial...

This paper assesses the importance of taxation on foreign direct investment contributing to the literature in two ways. First, it relates bilateral FDI among OECD countries over the 1990s to a new set of estimates of corporate tax wedges that include many relevant aspects of FDI taxation. Second, it controls for a large set of additional policy and non-policy factors that may affect the attractiveness of a country for foreign investors. Furthermore, the empirical approach is novel in that it focuses on a semi-parametric estimation methodology that accounts for a number of unobserved effects possibly impinging on the choice of investment location by multinational enterprises. Consistent with previous findings, the estimation results suggest that corporate taxation has a non-negligible impact on FDI location choices. However, the results suggest that focusing only on taxation in home and host countries and omitting other policies (such as border policies and labour and product market settings) may lead to a serious overestimation of tax elasticities and their relevance for policy. Fiscalité, environnement des entreprises et localisation des IDE dans les pays OCDE Cette étude évalue l'importance des politiques fiscales pour les investissements directs étrangers (IDE). Il contribue a littérature de deux façons: d'une part, l'étude établit un rapport entre les IDE bilatéraux dans les pays de l'OCDE pendant les années 90 et un nouvel ensemble d'indicateurs de taux effectifs d'imposition des sociétés couvrant plusieurs aspects de la taxation sur les IDE. D?autre part, il contrôle pour un ensemble des politiques économiques et autres facteurs susceptibles d'influencer l'attractivité d'un territoire pour les investisseurs étrangers. En outre, l'approche empirique est originale dans la mesure où elle utilise une méthodologie d'estimation semi-parametrique qui tient compte des effets inobservables affectant le choix de localisation des entreprises multinationales. En ligne avec les conclusions de la littérature, les résultats indiquent que l'imposition des sociétés a des incidences non-négligeables sur les choix de localisation des IDE. Cependant, les résultats indiquent qu'il est possible de sérieusement surestimer les élasticités par rapport aux taxes et leur importance politique en se concentrant seulement sur les impôts dans les pays d'origine et d'accueil des investissements, sans prendre en compte un certain nombre de politiques (telles que les obstacles frontaliers et le fonctionnement du marché du travail et des produits).foreign direct investment, panel data, corporate taxation, regulation, fiscalité des entreprises, données de panel, investissement direct étranger