Maria Abreu, Department of Spatial Economics, Free University Amsterdam, Amsterdam, The Netherlands, Henri L.F. De Groot, Dept. of Spatial Economics, Vrije Universiteit, Amsterdam, HV Amsterdam, The Netherlands, Raymond J.G.M. Florax, Dept. of Agricultural Economics, Purdue University
Dept. of Spatial Economics, Free University , Amsterdam, The Netherlands
Spatial Effects of Tax Regimes on Foreign Direct Investment (assigned to theme
We extend a general equilibrium model of foreign direct investment to allow for tax competition among potential host countries, and derive the implications for the spatial distribution of foreign direct investment and the spatial impact of different tax regimes. Using data on the outward foreign direct investment positions of a number of OECD and developing countries countries, we construct measures of multinational sales, and estimate the model using spatial econometrics. In addition to tax differences, we also control for differences in factor endowments and infrastructure among the potential host countries, and study the impact of regional trade agreements on the strength of the effects.
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