Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Taxes and the location of production: evidence from a panel of US multinationals

Taxes and the location of production: evidence from a panel of US multinationals

Journal article | Journal of Public Economics

This paper considers the factors that influence the locational decisions of multinational firms. A model in which firms produce differentiated products in imperfectly competitive markets is developed, in the spirit of . Firms choose between a number of foreign locations; the outside options of exporting to or not serving the foreign market are explicitly modelled. Particular attention is paid to the impact of profit taxes; the separate roles of effective average and marginal tax rates are identified. The model is applied to a panel of US firms locating in the European market. Agglomeration effects are found to be important. The effective average tax rate plays a role in the choice between locations, but not in the choice of whether to locate production in Europe compared with one of the outside options.

Find the working paper here.

Find out more

IFS Working Paper W96/14
This paper investigates a set of strategic decisions facing US firms.