Nicholas Sly
International fiscal policy coordination typically takes place via the signing of bilateral tax treaties. But what are the actual consequences of this coordination? Nicholas Sly has examined this in a recent project with Bruce A. Blonigen (University of Oregon) and Lindsay Oldenski (Georgetown University). They demonstrate that the effect of tax treaties on the behaviour of multinational firms varies substantially across different sectors. Moreover, failing to account for such differences across sectors will generate significant underestimates of the impact of tax treaties, obscuring important policy analysis. Their analysis, “The Differential Effects of Bilateral Tax Treaties”, provides a simple strategy to account for the heterogeneous responses of multinational firms across sectors.
Recognising that international tax treaties lead to greater integration of national economies, another current project, “International Fiscal Policy Coordination and GDP Comovement”, examines how such tax accords influence the transmission of economic shocks across borders. Indeed, recent episodes have demonstrated that few nations are isolated from the economic fortunes of other countries. Mr Sly and colleague Caroline Weber (University of Oregon) implement both parametric and non-parametric techniques to demonstrate that the introduction of a new tax agreement significantly raises the degree of comovement between treaty members. While fiscal policy is commonly thought to be a domestic policy tool, they find that the impacts of international fiscal policy have large economic magnitudes. The quantitative impact of new treaties is greater than even the effects of trade linkages and currency union membership. This fact has obvious relevance to the European Economic and Monetary Union, which is still debating fiscal policies with other member nations.
During his visit at CESifo beginning May 2013, Mr Sly will focus on the implications of multinational enterprise activity for wage distribution. While it is well-known that multinational firms pay higher wages, it is less clear if this is the result of selection effects, or if access to global markets with multinationals indeed leads to better wage outcomes for workers. The objective of his work while at CESifo will be to assess the importance of selection effects in a dynamic environment in explaining the so-called “multinational wage premium”.
Nicholas Sly is assistant professor of economics at the University of Oregon and is currently visiting the Paris School of Economics. He joined the faculty at Oregon in 2009, after completing his PhD at Michigan State University. His research has focussed on international trade, with particular interests in the relationship between labour market structure and the international organisation of production, as well as international tax policy.