Do Tax Havens Divert Economic Activity?

Do Tax Havens Divert Economic Activity?

Mihir A. Desai (Harvard Business School), C. Fritz Foley (Harvard Business School) and James R. Hines Jr. (University of Michigan) published on April 2005 this paper at Ross School of Business Paper No. 1024.

Here is the Abstract:

When multinational firms expand their operations in tax havens, do they divert activity from non-havens? Much of the debate on tax competition presumes that the answer to this question is yes. This paper offers a model for examining the relationship between activity in havens and non-havens, and discusses the implications of recent evidence in light of that model. Properly interpreted, the evidence suggests that tax haven activity enhances activity in nearby non-havens.

Available at SSRN: http://ssrn.com/abstract=704221 or DOI: 10.2139/ssrn.704221