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To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-9701.2009.01174.x Byline: Michael Overesch (1), Georg Wamser (2) Abstract: Abstract This paper investigates whether different types of FDI are asymmetrically affected by corporate taxation. We classify investment projects according to several characteristics such as the general motivation for FDI, the type of business activity, or the degree of internationalisation of the multinational firm. Subsequently, we analyse how local taxes influence the number of German outbound investments in European countries. The analysis reveals significant asymmetries with regard to tax effects: vertically integrated investments are more sensitive to host-country taxation than horizontal FDI; larger tax rate elasticities are estimated if business activities are considered highly mobile; and in accordance with profit-shifting considerations, subsidiaries of more internationalised companies are less tax responsive to host-country taxation. Author Affiliation: (1)Centre for European Economic Research (ZEW) (2)Ifo Institute

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-9701.2009.01214.x Byline: Michael Overesch (1), Johannes Rincke (2) Abstract: Abstract We exploit the rapid economic integration of Eastern and Western Europe after 1989 as a natural experiment to assess the effect of international competition for mobile capital on corporate tax rates. By means of a series of difference-in-difference estimations, we show that Western European countries which have been directly exposed to neighbours in Eastern Europe have reacted to the intensified competition by cutting their corporate tax rates by 8.1 to 10.5 percentage points relative to those countries which do not share a common border with countries in Eastern Europe. It seems that this effect has mainly worked through Eastern European countries offering lower wages and less through competition over corporate tax rates. Author Affiliation: (1)Centre for European Economic Research (ZEW), Mannheim (2)University of Munich