Sébastien Miroudot, Davide Rigo, 23 November 2021

What is the impact of trade agreements on the activities of multinational enterprises? How does the accession of countries to regional trade agreements affect multinationals’ decision to set up affiliates and produce in global value chains? Using a novel database on multinational production, this column investigates the impact of preferential trade agreements on foreign affiliates’ production activities. The findings suggest that investment provisions increase multinational production by facilitating multinationals’ operations in foreign markets, especially for activities requiring the proximity of suppliers and consumers, and by helping multinationals joining global value chains.

Vincent Aussilloux, Jean-Charles Bricongne, Samuel Delpeuch, Margarita Lopez Forero, 21 September 2021

French multinational enterprises have been expanding their activity abroad, including for profit-shifting purposes. These tax planning activities may alter the measurement and our understanding of their real activity. This column uses French micro-data from 1997 to 2015 to show that firm-measured productivity declines in the years following multinationals’ establishment of tax havens. Had these new presences in tax havens not been established, the annual growth of French aggregate labour productivity would have been 0.06% higher, which is tantamount to 9.7% of the observed annual aggregate labour productivity growth. 

Jozef Konings, Cathy Lecocq, Bruno Merlevede, 17 October 2018

Many countries have reduced their corporate income tax rates or introduced tax deductions, exclusions, and credits to attract foreign direct investment. This column discusses the introduction of the Notional Interest Deduction in Belgium, which allows companies to deduct from their taxable income an interest that is calculated based on the company’s equity. The deduction has increased employment in Belgian affiliates of multinational enterprises by between 6% and 8%.

Lee Branstetter, Fritz Foley, 13 November 2007

Here are some hard facts countering the myth that Western MNEs have hollowed out their domestic economies in their quest to build up China as the world’s factory.

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