Friday, December 23, 2011

Does our low corporate tax rate attract foreign direct invesment?

Some Christmas cheer:
The dark forces behind the Great Plan to Save The Euro would clearly like to get their hands on our low corporate tax rates. This would be the end of the world as we know it.
Or would it? This paper suggests otherwise. However it is highly unlikely that mere evidence will be sufficient to cause people to re-examine their views about this particular sacred cow.

Fiscal Policy and the Firm: Do Low Corporate Tax Rates Attract Multinational Corporations?

Nathan Jensen
In this paper, I explore the relationship between corporate tax rates and multinational production in the OECD from 1980-2000. I utilize a time-series-cross-sectional general error correction model to explore the impact of corporate taxation rates and FDI inflows in 19 OECD economies from 1990-2000. I find that there is no relationship between corporate taxation and the investments of multinational corporations.

1 comment:

Enda Hargaden said...

"To mitigate potential endogeneity problems, my identification strategy takes advantage of delays between the passage of tax reductions and the implementation of these policies."

Fairly weak, non?