Do Bilateral Tax Treaties Promote Foreign Direct Investment?

Bruce A. Blonigen, Ronald B. Davies

NBER Working Paper No. 8834
Issued in March 2002
NBER Program(s):   ITI   PE

We explore the impact of bilateral tax treaties on foreign direct investment using data from OECD countries over the period 1982-1992. We find that recent treaty formation does not promote new investment, contrary to the common expectation. For certain specifications we find that treaty formation may actually reduce investment as predicted by arguments suggesting treaties are intended to reduce tax evasion rather than promote foreign investment.

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Published:

• Bruce A. Blonigen & Ronald B. Davies, 2004. "The Effects of Bilateral Tax Treaties on U.S. FDI Activity," International Tax and Public Finance, Springer, vol. 11(5), pages 601-622, 09. ,
• Hartigan, J. (ed.) Handbook of International Trade, Volume II: Economic and Legal Analysis of Laws and Institutions. Oxford, U.K. and Cambridge, MA: Blackwell Publishers, 2005.

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