Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/158021
Authors: 
Goldbach, Stefan
Nagengast, Arne J.
Steinmüller, Elias
Wamser, Georg
Year of Publication: 
2017
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 14/2017
Abstract: 
This paper examines the relationship between foreign and domestic investment activity of multinational enterprises. The empirical analysis is based on micro data of German firms and their operations at home and abroad, including information on investment in fixed assets. The empirical approach, which rests upon extensive and intensive margin variation, is shown to produce very robust results. These suggest a positive relationship between foreign and home investment in real capital. This positive effect seems to be mainly related to additional opportunities for tax planning and better access to financing capital. In contrast, we do not find evidence that improved production processes and technology upgrading cause the positive effect on investment at home. Our empirical approach allows us to distinguish between an extensive and intensive margin effect: setting up a new foreign affiliate leads to an immediate positive effect of about EUR 450,000 additional investment; the investment elasticity at the intensive margin is estimated to be approximately 0.13.
Subjects: 
Outward FDI
Multinational Firms
Domestic Investment
Corporate Taxes
Internal Capital Markets
Technology
JEL: 
F23
F61
H25
L23
ISBN: 
978-3-95729-365-7
Document Type: 
Working Paper

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