International Tax and Public Finance

, Volume 10, Issue 6, pp 673-693

First online:

Taxation and Foreign Direct Investment: A Synthesis of Empirical Research

  • Ruud A. de MooijAffiliated withCPB Netherlands Bureau for Economic Policy Analysis, Erasmus University Rotterdam;CESifo;, Tinbergen Institute
  • , Sjef EderveenAffiliated withCPB Netherlands Bureau for Economic Policy Analysis, Erasmus University Rotterdam;

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access


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 taxation foreign direct investment Meta analysis