International Tax and Public Finance

, Volume 10, Issue 6, pp 673–693

Taxation and Foreign Direct Investment: A Synthesis of Empirical Research

  • Ruud A. de Mooij
  • Sjef Ederveen

DOI: 10.1023/A:1026329920854

Cite this article as:
de Mooij, R.A. & Ederveen, S. International Tax and Public Finance (2003) 10: 673. doi:10.1023/A:1026329920854


This paper reviews the empirical literature on the impact of company taxes on the allocation of foreign direct investment. We compare the outcomes of 25 empirical studies by computing the tax rate elasticity under a uniform definition. The median value of the tax rate elasticity in the literature is around −3.3 (i.e. a 1%-point reduction in the host-country tax rate raises foreign direct investment in that country by 3.3%). There exists substantial variation across studies, however. By performing a meta-analysis, the paper aims to explain this variation by the differences in characteristics of the underlying studies. Systematic differences between studies are found with respect to the type of foreign capital data used, and the type of tax rates adopted. We find no systematic differences in the responsiveness of investors from tax credit countries and tax exemption countries.

company taxationforeign direct investmentMeta analysis

Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Ruud A. de Mooij
    • 1
    • 2
  • Sjef Ederveen
    • 1
  1. 1.CPB Netherlands Bureau for Economic Policy AnalysisErasmus University Rotterdam;The Netherlands
  2. 2.CESifo;Tinbergen InstituteThe Netherlands