Feenstra and Hanson (1997) have argued in the context of the North American Free Trade Agreement that US outsourcing to Mexico leads to an increase in the skill premium in both the US and Mexico. In this paper we show on the example of Austria and Poland that with the new international division...

The countries comprising the Southern African Customs Union (SACU) are currently not very integrated into global value chains (GVCs), potentially missing out on important development opportunities. Accordingly, we explore high level options for promoting their integration. Given East Asia's...

Tariffs have almost completely disappeared but various restrictions on foreign entry remain for multinationals. Many trade agreements and Bilateral Investment Treaties (BITs) have been signed to lower tariffs and reduce the risks of expropriation. Why do we see so few agreements removing FDI...

In contrast to empirical evidence, recent theories of cross-border mergers and acquisitions (M&As) assume perfect knowledge transfers – from high to low productivity firms – between acquirer and target. Using the Melitz (2003) model of heterogeneous firms, we develop a matching model of...

Bargaining power may explain the tax differences between multinational and national enterprises beyond MNEs' profit shifting. Larger firms (mostly MNEs) are more valuable for tax authorities for various reasons. In threatening relocation, larger firms extract greater deductions, resulting in a...

Recent empirical research documents a tendency of affiliates of multinational enterprises to bunch around zero reported profit. Setting up a model that allows for profitable and loss-making affiliates of multinationals, we show that profit shifting to a low-tax country as well as a loss-related,...

This paper explores the effects of tax provisions aimed at restricting multinationals' tax planning on foreign direct investment (FDI). Using a unique dataset which allows us to observe the worldwide activities of a large panel of multinational firms, we test how limitations of interest tax...

This paper examines location choices of multinational enterprises (MNEs). We particularly focus on the consequences of double taxation treaties (DTTs) and corporate profit taxes on the probability to choose a location. DTTs have become a key policy instrument used by countries to regulate...

We analyze a model that focuses on the export/outsource decision. Outsourcing has the advantage of providing better information about local preferences. The disadvantage is that producing in the host country also means using the inferior technology embodied in the local capital. The decision of...

This paper examines how restrictions on the tax-deductibility of interest cost affect location choices of multinational corporations (MNCs). Many countries have introduced so-called thin-capitalization rules (TCRs) to prevent MNCs from shifting tax base to countries with lower tax rates. As of...