The impact of taxes and public spending on the location of FDI: evidence from FDI-flows within Europe

In a place to place analysis of bilateral FDI flows the average company tax burden, the statutory corporation tax rate, as well as the cost of capital are used to capture the tax incentives. In addition, indicators of public spending in general and with regard to different functions of government and rankings of competitiveness related to public sector activities are used to measure the role of public service provision. The results show significant effects of tax incentives, in particular, the marginal tax burden and the statutory tax rate prove jointly significant. However, only weak indications of a countervailing effect of public expenditures are found. --

Local Determinants of Crime: Distinguishing Between Resident and Non-resident Offenders

The paper explores the differences in the empirical determinants of crime using a spatial model which distinguishes resident and non-resident offenders. Using data for German municipalities, the model is estimated by means of a spatial GMM approach, where the local property value is instrumented by a couple of amenity variables. The results show that aside of the local property value several local population characteristics, such as income, poverty, inequality, unemployment, family disruption, and citizenship have the expected effects on crime committed by resident offenders. However, crime committed by non-resident offenders is shown to be significantly related to the conditions in adjacent municipalities as captured by spatial lags of population characteristics.

The Role of the Corporate Income Tax as an Automatic Stabilizer

This paper analyses the effectiveness of the corporate income tax as an automatic stabilizer. It employs a unique firm-level dataset of German manufacturers combining financial statements with firm-specific information about credit market restrictions. The results show that approximately 20 per cent of all firms report both positive taxable income and capital market restrictions. Taking account of the income tax rates and the size differences of the firms, we find that demand stabilization through the corporate income tax amounts to about 8 per cent of an initial shock to gross revenues. This stabilization effect varies over the business cycle and tends to increase during cyclical downturns.corporate income tax, stabilization, capital market restrictions, loss offset, firm-level data

Tax incentives and the location of FDI: evidence from a panel of German multinationals

Using a firm-level dataset this paper investigates the impact of taxation on the decision of German multinationals to hold direct investments in other European countries or abroad. Controlling for firm-specific differences in the valuation of potential locations, the results confirm significant effects of tax incentives, market size, and of labor cost on cross-border location decisions. In accordance with Devereux and Griffith (1998) we find that the marginal tax rate has no predictive power for location decisions whereas effective average and statutory tax rates exert significant effects. In particular, the statutory tax rate has strong predictive power for the likelihood of direct investment holdings at a location. The results indicate that an increase in the statutory tax rate by 10 percentage points reduces the odds of observing some positive direct investment by approximately 20 %. --Location,FDI,Taxes,Firm-Level Panel Data,Fixed-Effects Logit Model

Equalization Transfers and Dynamic Fiscal Adjustment: Results for German Municipalities and a US-German Comparison

A large panel of German municipalities is employed in order to investigate the dynamic fiscal policy adjustment of local jurisdictions using a VEC model which explicitly takes account of the intertemporal budget constraint. The results confirm that a substantial part of adjustment takes place by offsetting changes in intergovernmental transfers, in particular, in ‘fiscal equalization’ transfers: in present value terms about 34 cents of a one euro decrease in own revenue is compensated by subsequent changes in equalization transfers. The contribution of intergovernmental transfers to restoring fiscal balance, therefore, is about two to three times higher, compared to the case of US municipalities investigated by Buettner and Wildasin (2006). Nevertheless, budget components such as own revenues and general expenditures display larger fluctuations in the German case. This is consistent with the view that fiscal equalization transfers create a moral-hazard problem.Fiscal balance; Intergovernmental transfers; Local governments; Fiscal equalization

Local Determinants of Crime: Distinguishing between Resident and Non-Resident Offenders

The paper revisits the local determinants of crime using a spatial model distinguishing between resident and non-resident offenders. Employing data for German municipalities, the model is estimated by means of a spatial GMM approach. Focusing on resident offenders legal earnings opportunities and the expected gain from offenses are found to be important determinants of crime. Also the socio-economic background in terms of unemployment, poverty, and inequality proves significant for both property and violent crime. Whereas local inequality only shows an effect on crime committed by resident offenders, crime committed by non-resident offenders is shown to be significantly related to the characteristics in adjacent municipalities such as unemployment and income.Crime, Causes of Crime, Cross-Sectional Study, Spatial Econometrics, Crime Spillovers, Neighborhood Effects, Instrumental Variables

Labor Market Effects of Economic Integration - The Impact of Re-Unification in German Border Regions

The paper argues that economic integration causes problems for the labor market of high-wage countries due to cross-border labor mobility and the accompanying increase in labor supply. Empirical evidence is provided from an analysis of regional labor market effects of German re-unification. In the aftermath of the re-unification shock, despite some gain in employment, border regions situated on the former German-German border are found to have experienced a fall in the relative wage position and an increase in unemployment relative to other West-German regions. As this points to adverse labor supply effects for resident workers due to cross-border labor mobility, this result is bad news for EU regions situated on the border with the Accession countries in Central and Eastern Europe.economic integration, border regions, EU enlargement, German re-unification, differences in differences estimation

Intercompany Loans and Profit Shifting – Evidence from Company-Level Data

This paper is concerned with tax-planning strategies of multinational corporations. A theoretical analysis discusses the choice of the capital structure in a setting where intercompany loans can be used to shift profits to low-tax countries. Empirical evidence is provided using micro-level panel data of virtually all German multinationals made available by the Bundesbank. This comprehensive dataset allows us to exploit differences in taxing conditions of almost eighty countries during a period of nine years. The empirical results confirm a robust impact of tax-rate differences within the multinational group on the use of intercompany loans, supporting the profit-shifting hypothesis. However, the implied tax-revenue effects are rather small, suggesting that costs related to adjusting the capital structure for profit-shifting purposes are substantial.corporate taxation, multination corporations, tax planning, intercompany loans, tax haven, FDI, micro-level data

Towards Design Principles for Data-Driven Decision Making: An Action Design Research Project in the Maritime Industry

Data-driven decision making (DDD) refers to organizational decision-making practices that emphasize the use of data and statistical analysis instead of relying on human judgment only. Various empirical studies provide evidence for the value of DDD, both on individual decision maker level and the organizational level. Yet, the path from data to value is not always an easy one and various organizational and psychological factors mediate and moderate the translation of data-driven insights into better decisions and, subsequently, effective business actions. The current body of academic literature on DDD lacks prescriptive knowledge on how to successfully employ DDD in complex organizational settings. Against this background, this paper reports on an action design research study aimed at designing and implementing IT artifacts for DDD at one of the largest ship engine manufacturers in the world. Our main contribution is a set of design principles highlighting, besides decision quality, the importance of model comprehensibility, domain knowledge, and actionability of results

Competing magnetic anisotropies in atomic-scale junctions

Using first-principles calculations, we study the magnetism of 5d transition-metal atomic junctions including structural relaxations and spin-orbit coupling. Upon stretching monatomic chains of W, Ir, and Pt suspended between two leads, we find the development of strong magnetism and large values of the magnetocrystalline anisotropy energy (MAE) of up to 30 meV per chain atom. We predict that switches of the easy magnetization axis of the nanocontacts upon elongation should be observable by ballistic anisotropic magnetoresistance measurements. Due to the different local symmetry, the contributions to the MAE of the central chain atoms and chain atoms in the vicinity of the leads can have opposite signs which reduces the total MAE. We demonstrate that this effect occurs independent of the chain length or geometry of the electrodes.Comment: accepted for publication in Phys. Rev.