Titolo
Distance, Relative Size and Fiscal Competition for Foreign Direct Investments
Periodico
Università degli Studi del Piemonte Orientale 'A. Avogadro' : Facoltà di Economia - Dipartimento di Scienze Economiche e Metodi Quantitativi "SEMEQ" - Quaderni
Anno: 2010 - Fascicolo: 3 - Pagina iniziale: 1 - Pagina finale: 31

This paper provides a reassessment of the role of corporate tax strate-gic interactions in the process of …scal competition among national countries to attract Foreign Direct Investments. Di¤erently from the other papers in this …eld, where a particular pattern of interaction is imposed directly in the econometric speci…cation, in the present article we develop a simple theoret-ical model that allows us to identify which elements in‡uence, for each pair of countries, the intensity of their interaction. In particular, we derive a re- action function whose positive slope depends on the relative size and on the geographical distance of the competing countries. In the empirical part of the paper, in order to test the theoretical implications of our model, we develop a more ‡exible speci…cation of the classical Spatial Autoregressive Model that allows us to estimate the elements of a parameterized weight matrix as functions of distance and relative size. By applying Maximum Likelihood methods on a panel dataset of 15 European countries in the period 1982-2005, we find strong evidence supporting our theoretical insights. Moreover, in line with a number of previous studies, estimation results con…rm that, when employing our theoretically founded weights, countries react to each other tax policies following a positively sloped reaction function.



Testo completo: http://semeq.unipmn.it/files/WP2010(3).pdf

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