Group 6: FDI and Corporate Taxation

David Candon
Andrew O'Brien
David Fleming
Joseph Slowey
Nigel Shekelton

informal overview
So, as the title suggests we are looking at the sensitivities (elasticities) of US FDI to corporate tax rate differences across the EU-15 and over time. We both want to assess what country specific differences affect the choices that US companies make when allocating capital, and whether these choices have become more sensitive over time. The dependent variable will be total dollar capital invested per country for a calendar year, for manufacturing firms only. This data is readily available at the BEA. The dependent tax variable should be some nominal statutory tax rate. The academic literature seems to use an average effective taxt rate, but they have access to tax files and have time to sift through these. We have neither, so we will just go for a broader rate. Further explanatory variables will be country-specific variables such as, population, dependancy ratios, ratio of fluent english speakers, gdp relative to US, exhange rate to US, openess, and finally the data from the Global Competivness Survey, which will offer great insight into why (or not) CEOs choose to invest in certain countries. We think that some qualitative variables (or perhaps quantitative) could be of some use here, particularly ones about instiutional quality (business laws) and infrastructure (Ireland doesnt fare well here, for example). We will be taking three cross-sections at years 1994, 2000 and 2005. This captures three periods from the start of the EMU until the asscession nations joined. We will be attempting a panel data model, although we have some questions on this