FDI AND TAXATION: A META-STUDY

In this paper we extend former meta-analyses on FDI and taxation in three ways. First, we add 16 recent publications. Second, we code additional meta-regressor variables addressing important issues in research on FDI and taxation. Third, we refer to the sophisticated meta-analytical methodology and present a coherent strategy to choose the meta-regression estimator most suitable for the meta-data at hand. As compared to prior surveys, the meta-analysis is thus based on a much broader methodological basis and a considerably richer meta-data set. The median tax semi-elasticity of FDI based on 704 primary estimates is 2.49 in absolute terms. The precision weighted average of the full sample of semi-elasticities is 2.55, again in absolute terms. Moreover, our meta-analysis shows that there is a publication bias in the primary literature. Meta-regressions show that studies based on aggregate data report systematically larger semi-elasticities than firm-level analyses, that integrating bilateral tax regulations into effective tax rates leads to more effective measurement of adverse tax incentives on foreign investment, and that tax effects are not compensated by public spending.