The Impact of Double Taxation Treaties on Foreign Direct Investment: Evidence From Large Dyadic Panel Data

Abstract

To increase inward foreign direct investment (FDI), policy-makers increasingly resort to the ratification of double taxation treaties (DTTs). However, the effectiveness of DTTs in inducing higher FDI is still open to debate, as the empirical evidence of existing studies is anything but conclusive. In contrast to earlier approaches, we use a largely unpublished dataset on bilateral FDI stocks, covering a much larger and more representative sample of host and source countries. Controlling for standard determinants of FDI and employing various econometric specifications, our results indicate that DTTs do lead to higher FDI stocks and that the effects are substantively important as well.3

Are Stricter Investment Rules Contagious? Host Country Competition for Foreign Direct Investment Through International Agreements

“…It is also noteworthy in this context that Barthel et al (2010) find a fairly high correlation between inward and outward FDI stocks for those dyads in the FDI database which is also underlying our analysis with both the host and the source country reporting the relevant (inward and outward) FDI data (r=0.86).…”

“…In addition, our estimation model contains several control variables which are widely used in the relevant literature (FDI stock data are sourced from Barthel et al 2010; all other data come from Barthel and Neumayer 2012). First, we control for other treaties concluded by a source-host country pair such as double taxation treaties (DTTs) in all estimations and PTAs in estimations where the dependent dummy variable refers only to…”

Are stricter investment rules contagious? Host country competition for foreign direct investment through international agreements

“…In addition, our estimation model contains several control variables which are widely used in the relevant literature (FDI stock data are sourced from Barthel et al 2010; all other data come from Barthel and Neumayer 2012). First, we control for other treaties concluded by a source-host country pair such as double taxation treaties (DTTs) in all estimations and PTAs in estimations where the dependent dummy variable refers only to BITs.…”

Institutional Investors and Cross-Border Mergers and Acquisitions: the 2000-2012 Period

“…Barthel et al (2010) show that the amount of FDI is larger if two countries have a double taxation treaty. Ahern et al (2015) present strong evidence that the bilateral investment treaty and double taxation treaty are strongly related to the volume of cross-country M&A transactions.…”