Susanna Thede

The Multifaceted Impact of Corruption on International Trade

The purpose of this paper is to perform a detailed examination of corruption effects on trade based on corruption characteristics known to affect economic exchange within the corruption research field. These characteristics are the level, prevalence, customs location, function and predictability of corruption. The multifaceted corruption impact on trade is empirically examined using a corruption-augmented gravity equation. The equation is estimated using a Heckman version of a GMM instrumental variable method. Our results provide strong evidence of that import flows vary systematically with the investigated corruption characteristics and enable the identification of channels through which corruption affects international trade. The empirical investigation clearly indicates the need to examine the multifaceted role of corruption to properly assess the trade effects of corruption.

Determinants of the Firm’s Foreign Internalization Decision

This paper empirically investigates predictions of recently developed property-rights theories on the firm’s foreign internalization decision (Antras and Helpman, Journal of Political Economy, 112(3), 552–580, 2004; Antras and Helpman, The Organisation of Firms in a Global Economy. Harvard University Press, 2008). Using census data on Swedish manufacturing firms for the 1997–2007 time period, we provide novel and complementary evidence on the topic. In particular, our data enables us to investigate the firm’s foreign internalization decision directly in a sample that is not subject to sample selection bias. Our estimation results provide stark evidence in favor of the predicted impact of firm heterogeneity and foreign contracting enforcement that lies at the heart of the reference theories. Firms in industries with larger within-industry firm variation, as depicted by the variation in TFP levels, are more prone to integrate offshored production. We also provide novel evidence on the interplay of firm heterogeneity and property-rights factors at the firm level. In particular, the estimation results confirm the Antras and Helpman (2008) prediction that foreign legislative institutions in support of headquarter provision favor the firm’s foreign internalization decision.

Changing Capitalism in the Arab and Muslim World

As the ‘Arab Spring’ turns into winter, the literature on the causes of the revolts and their aftermath has grown steadily. The general thrust of most books is that the 2011 Arab uprisings exposed ...

Do Swedish Multinationals Pay Less in Taxes than Domestic Firms

In recent years, there has been growing concern that multinational enterprises (MNEs) engage in strategic tax planning in order to shift profits to low-tax jurisdictions. This common perception is generally confirmed by empirical evidence, which is foremost provided for countries with high corporate taxes and relatively complex tax systems. We investigate whether multinational firms in a country with a comparatively more competitive tax system undertake profit shifting. We do this by using detailed census data from corporate income statements and balance sheets filed by Swedish manufacturing firms between 1997 and 2007. Many previous studies have used tax-rate differences to identify profit shifting. These studies, however, run the risk of overestimating the amount of tax shifting as this method entangles tax-planning activities with the effect a lower corporate tax rate has on resulting profits. We avoid this by comparing MNEs with domestic firms unable to benefit from other tax jurisdictions. In particular, we identify systematic differences in tax payments, earnings (before interest and taxes), and equity ratios between multinational and comparable domestic firms based on propensity score matching. In addition, we examine the tax behavioral impact of acquiring multinational status using difference-in-differences estimations and/or propensity-score matching. Our results reveal that the extent to which multinational firms’ have lower tax payments than their domestic counterparts depends on their production characteristics and foreign market outreach. In particular, we find evidence indicating that firms operating in few foreign markets and firms that become multinational engage in profit shifting from Sweden. (Less)

Bending the rules, breaking the rules: How corruption and lobbying affect the investment market selection of Swedish firms

There is stark evidence that many policies which influence firm gains from engaging in FDI (such as tax and trade policies) are targeted by lobbying groups and that corruption can be an important determinant of market attractiveness. The scarce research that exists on firm behaviour, corruption and lobbying shows that these activities can be regarded as alternative, and interdependent, influence forms. This paper provides the novel contribution of investigating how the market infiltration of corruption and lobbying affects the firms investment decision. We identify the interdependent effects using census data for Swedish manufacturing firms that allows a complete identification of the firms market selection. Our results reveal that these private–public sector links influence the firms investment decision differently, as market selection is deterred by corruption and stimulated by lobbying, and that they function as substitutes. We show that the stimulating lobbying effect largely can be attributed to its interdependency with corruption, which suggests that firms are more shielded from corruption in lobbying environments. Further investigation reveals that the corruption and lobbying effects are not always representative of larger firms: The largest firms are undeterred by corruption in markets where lobbying forms an integral part of the business environment and larger firms are not stimulated by lobbying in markets largely void of corruption.