Location and Production Decision of Multinationals

The objective of the Project is to assess the economic effects of international tax competition, where the focus lies an the presence of mobile production capital and the existence of multinational firms. We extend the previous work an trade and multinationals (i) by accounting for different modes of taxation and their economic consequences, and (ii) by assessing empirically the associated hypotheses from our own theoretical work and the recent literature an tax competition, using different available (micro) data bases with a special focus an firm level data. Specifically, we plan to proceed in four directions: (i) the impact of different modes of tax treaties an bilateral FDI activity (theoretical framework and empirical assessment); (ii) the role of different modes of national taxes an the distribution of production activities of multinational firms within Europe; (iv) the importance of different laxes as an impediment to the international transfer of knowledge (theoretical framework and empirical assessment). On the basis of our econometric findings, we perform model simulations to investigate, for instance, the direct consequences of a European tax harmonization an the allocation of multinational production across countries. This, in turn, should enable us to compare different tax harmonization scenarios in a tentative way.