Fiscal Policy and the Firm

Abstract

The existing literature on the political economy of taxation explores how the mobility of firms affects the ability of governments to tax capital. In this article the author tests the relationship between corporate tax rates and multinational investment decisions in advanced, industrialized economies. He utilizes a time-series cross-sectional general error correction model to explore the impact of corporate taxation rates and foreign direct investment (FDI) inflows in up to 19 Organisation for Economic Co-operation and Development economies from 1980 to 2000. To mitigate potential endogeneity problems, the author’s identification strategy takes advantage of delays between the passage of tax reductions and the implementation of these policies. The author finds no relationship between corporate tax rates and flows of foreign direct investment. This finding has implications on the link between globalization and domestic politics.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 34 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.