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The results appear in table 3. The first column includes firms from all industries, while columns 2 and 3 separately estimate the effects of BTTs in industries with high and low levels of royalty, interest, and dividend (RID) payments. A positive point estimate for the BTT indicator's coefficient implies that parent firms whose affiliates receive BTTs expand employment on average in comparison to parents whose affiliates do not. The effect on all parents in column 1 is statistically insignificant.17 However, when restricting the sample to parents in high-RID industries, BTTs have large and statistically significant effects. This is expected since double taxation is more likely in these industries prior to BTT implementation. In contrast, the estimates for low-RID industries are much smaller and statistically indistinguishable from 0. Introducing additional controls in columns 4 to 6 yields similar results. The coefficient in column 5 implies that a BTT for a multinational firm with single affiliate in high-RID industries increases domestic employment by 6.6%.18

Table 3.

Reduced-Form-Difference-in-Differences Analysis: The Effect of BTTs on Parent Employment

Dependent Variable: Log Parent Employment—ln(sft)
(1)(2)(3)(4)(5)(6)
SampleAllHigh RIDLow RIDAllHigh RIDLow RID
BTT φ˜f1(tt˜f) 0.027 0.055*** −0.009 0.012 0.064*** −0.027 
 (0.007) (0.014) (0.013) (0.090) (0.023) (0.018) 
ln(GDPus+GDPd)    0.025 −0.076 0.196 
    (0.123) (0.147) (0.189) 
ln(GDPus-GDPd)2    −0.054 −0.006 −0.135 
    (0.061) (0.072) (0.094) 
ln(SkillDifference)    −0.077 −0.084 −0.066 
    (0.050) (0.059) (0.095) 
ln(TradeCosts)    0.003 0.012 0.003 
    (0.015) (0.017) (0.030) 
BIT    −0.287 −0.242 −0.259 
    (0.177) (0.244) (0.23) 
FTA    −0.008 −0.08 0.02 
    (0.062) (0.088) (0.079) 
Exchange Rate    −0.0001 −0.0001 0.0001 
    (0.000) (0.000) (0.000) 
Parent FE YES YES YES YES YES YES 
Industry-Year FE YES YES YES YES YES YES 
N 43,233 29,765 13,468 43,233 29,765 13,468 
R-squared 0.0021 0.0033 0.0002 0.0573 0.0644 0.0431 
Dependent Variable: Log Parent Employment—ln(sft)
(1)(2)(3)(4)(5)(6)
SampleAllHigh RIDLow RIDAllHigh RIDLow RID
BTT φ˜f1(tt˜f) 0.027 0.055*** −0.009 0.012 0.064*** −0.027 
 (0.007) (0.014) (0.013) (0.090) (0.023) (0.018) 
ln(GDPus+GDPd)    0.025 −0.076 0.196 
    (0.123) (0.147) (0.189) 
ln(GDPus-GDPd)2    −0.054 −0.006 −0.135 
    (0.061) (0.072) (0.094) 
ln(SkillDifference)    −0.077 −0.084 −0.066 
    (0.050) (0.059) (0.095) 
ln(TradeCosts)    0.003 0.012 0.003 
    (0.015) (0.017) (0.030) 
BIT    −0.287 −0.242 −0.259 
    (0.177) (0.244) (0.23) 
FTA    −0.008 −0.08 0.02 
    (0.062) (0.088) (0.079) 
Exchange Rate    −0.0001 −0.0001 0.0001 
    (0.000) (0.000) (0.000) 
Parent FE YES YES YES YES YES YES 
Industry-Year FE YES YES YES YES YES YES 
N 43,233 29,765 13,468 43,233 29,765 13,468 
R-squared 0.0021 0.0033 0.0002 0.0573 0.0644 0.0431 

Documents the effects of newly signed bilateral tax treaties (BTTs) on parent employment at multinational firms. “High RID” and “Low RID” refer to firms within industries that exhibit ratios of total payments in royalties, interest, and dividends relative to total industry sales that are above and below the median sector (see appendix A.2 for details). Sample covers 1987 to 2007. Standard errors clustered by both parent firm and year are in parentheses. Significant at *10%, **5%, and ***1%.

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