Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253556 
Year of Publication: 
2022
Series/Report no.: 
Freiburger Diskussionspapiere zur Ordnungsökonomik No. 22/4
Publisher: 
Albert-Ludwigs-Universität Freiburg, Institut für Allgemeine Wirtschaftsforschung, Abteilung für Wirtschaftspolitik und Ordnungsökonomik, Freiburg i. Br.
Abstract: 
Previous empirical studies suggest that decentralization, measured by the number of government layers, is associated with less foreign direct investment (FDI). With an improved dataset on tax autonomy of sub-federal government tiers, we present evidence that fiscal decentralization (de facto) does not reduce FDI. If local governments can set their tax rates and bases independently, they attract more FDI. Analyzing 83,458 corporate cross-border acquisitions (CBA), between 148 source and 187 host countries from 1997 to 2014, we also find that takeovers between two countries increase with size, cultural similarities and common borders of two economies. Shared institutions such as membership in a customs union facilitate CBA. These results apply for high-income hosts but not for middle-income countries.
Subjects: 
Fiscal Decentralization
Cross-Border Acquisition (CBA)
Foreign Direct Investment (FDI)
Tax Autonomy
JEL: 
G34
H25
H71
Document Type: 
Working Paper

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