Arbeitspapier
How Do Corporate Tax Hikes Affect Investment Allocation within Multinationals?
This paper studies how corporate tax hikes transmit across countries through multinationals' internal networks of subsidiaries. We build a parsimonious multicountry model to underscore two opposing spillover effects: While tax competition between countries generates positive investment spillover, intra-firm production linkages predict negative spillover. Using subsidiary-level data and exogenous corporate tax hikes, we find that local business units cut investment by 0.4% for a 1% increase in foreign corporate tax. This result highlights the importance of production linkages in propagating foreign tax shocks, as the supply-chain-induced negative spillover dominates the positive spillover effect suggested by the conventional wisdom of tax competition.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 10272
investment
internal networks
multinationals
spillover effects
Jacob, Martin
Schindler, Dirk
Xu, Guosong
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:21 MESZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- De Vito, Antonio
- Jacob, Martin
- Schindler, Dirk
- Xu, Guosong
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2023
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