We investigate whether the impact of higher corporate tax rates on foreign direct investment (FDI), at home or abroad, depends on the external financial dependence of a given sector. By structurally relying on debt for the funding of their operations, firms operating in externally dependent (ED)...

Alfaro, Kalemli-Ozcan, and Volosovych (2008) argue that accounting for differences in institutional quality makes the Lucas Paradox disappear. We show that their key finding is driven by the presence of outliers. Once we control for them, we find that the Lucas Paradox remains.