The Effects of Bilateral Tax Treaties on U.S. FDI Activity / Bruce A. Blonigen, Ronald B. Davies.

Format:

Book

Author/Creator:

Blonigen, Bruce A.

Contributor:

National Bureau of Economic Research.

Davies, Ronald B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7929.

NBER working paper series no. w7929

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

The effects of bilateral tax treaties on FDI activity have been unexplored, despite significant ongoing activities by countries to negotiate and ratify these treaties. This paper estimates the impact of bilateral tax treaties using both U.S. inbound and outbound FDI over the period 1966-1992. Our estimates suggest a statistically significant average annual increase of FDI activity for each additional year of a treaty which ranges from 2% to 8%, depending on the FDI activity measure and empirical framework we employ. Examination for nonlinear effects of treaty age on FDI activity suggests that while treaties have an immediate impact on FDI flows, there is a substantial lag before treaty adoption positively affects FDI stocks and affiliate sales. Finally, our results suggest that bilateral tax treaties have an effect on investment outside of the withholding tax rates they alter, which may include the commitment and risk reduction effects of these treaties.

Notes:

Print version record

October 2000.