Browsing by Person "Riedel, Nadine"

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Asymmetric obligations
(2011) Schildberg-Hörisch, Hannah; Riedel, Nadine
We use a laboratory experiment to investigate the behavioral effects of obligations that are not backed by binding deterrent incentives. To implement such expressive law' we introduce different levels of very weakly incentivized, symmetric and asymmetric minimum contribution levels (obligations) in a repeated public goods experiment. The results provide evidence for a weak expressive function of law: while the initial impact of high obligations on behavior is strong, it decreases over time. Asymmetric obligations are as effective as symmetric ones. Our results are compatible with the argument that expressive law affects behavior by attaching an emotional cost of disobeying the own obligation.
Business taxes and the electoral cycle
(2012) Riedel, Nadine; Foremny, Dirk
The purpose of this paper is to assess whether politicians manipulate the timing of tax rate changes in a strategic way to maximize reelection prospects. To do so, we exploit the German local business tax as a testing ground which is set autonomously by German municipalities. As election dates vary across local councils, the data allows us to disentangle effects related to the timing of elections from common trends. Using a rich panel data-set for German municipalities, we assess the impact of elections on local business tax choices. The findings support the notion of a political cycle in tax setting behavior as the growth rate of the local business tax is significantly reduced in the election year and the year prior to the election, while it jumps up in the year after the election. This pattern turns out to be robust against a number of sensitivity checks.
Corporate taxation and the quality of research and development
(2013) Riedel, Nadine; Richter, Katharina; Ernst, Christof
This paper examines the impact of tax incentives on corporate research and development (R&D) activity. Traditionally, R&D tax incentives have been provided in the form of special tax allowances and tax credits. In recent years, several countries moreover reduced their income tax rates on R&D output. Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We provide evidence that, beyond this quantity effect, corporate taxation also distorts the quality of R&D projects, i.e. their innovativeness and revenue potential. Using rich data on corporate patent applications to the European patent office, we find that a low tax rate on patent income is instrumental in attracting innovative projects with a high earnings potential and innovation level. The effect is statistically significant and economically relevant and prevails in a number of sensitivity checks. R&D tax credits and tax allowances are in turn not found to exert a statistically significant impact on project quality.
Earnings shocks and tax-motivated income-shifting : evidence from European multinationals
(2011) Riedel, Nadine; Dharmapala, Dhammika
This paper presents a new approach to estimating the existence and magnitude of taxmotivated income shifting within multinational corporations. Existing studies of income shifting use changes in corporate tax rates as a source of identification. In contrast, this paper exploits exogenous earnings shocks at the parent firm and investigates how these shocks propagate across low-tax and high-tax multinational subsidiaries. This approach is implemented using a large panel of European multinational affiliates over the period 1995-2005. The central result is that parents? positive earnings shocks are associated with a significantly positive increase in pretax profits at low-tax affiliates, relative to the effect on the pretax profits of high-tax affiliates. The result is robust to controlling for various other differences between low-tax and high-tax affiliates and for country-pair-year fixed effects. Additional tests suggest that the estimated effect is attributable primarily to the strategic use of debt across affiliates. The magnitude of income shifting estimated using this approach is substantial, but somewhat smaller than that found in the previous literature.
Inter-firm R&D networks in pharmaceutical biotechnology : what determines firm's centrality-based partnering capability?
(2013) Schwalbe, Ulrich; Riedel, Nadine; Krogmann, Yin
This paper analyses the inter-firm R&D network formed in the pharmaceutical biotechnology industry during the 1990s from different perspectives: theoretical network formation, firm's structural positions and its collaborations at the entire network level, and the determinants for firm's centrality-based partnering capability. The results indicate that pharmaceutical biotechnology industry has experienced a significant evolutional change in size and structure during 1991-1998. By considering individual structural positions, the descriptive statistics show that in the 1990s, established pharmaceutical companies developed into dominant star players with multiple partnerships while holding central roles in the R&D network. In the network analysis that emphasized aggregate network level, the degree-based and betweenness-based network centralization were not high implying that the distribution of overall positional advantages in the pharmaceutical biotechnology industry is, to a large degree, not unequal and even though most firms in this sector are linked to the R&D network, some of them are more active than others. The current analysis also shows that firm's efficiency, firm's dependency on its complementary resources and firm's experiences at managing partnerships are important determinants for firm's centrality-based partnering capability, which has important managerial implications for understanding firm's strategic partnering behaviour.
The impact of transfer pricing regulations on profit shifting within European multinationals
(2012) Lohse, Theresa; Riedel, Nadine
Over the past decade, several countries augmented their national tax law by transfer pricing legislations in order to limit opportunities for tax- motivated transfer price distortions and the associated relocation of multna- tional income from their borders. The aim of this paper is to empirically investigate the impact of transfer pricing laws on multinational profit shifting behaviour. To do so, we collect unique data on the evolution of national trans- fer price requirements in Europe over the past decade. This data is linked to accounting information on multinational firms in the EU and to corporate tax rate data. In line with previous studies, we find that multinational firms engage in significant tax-motivated profit shifting behaviour. The analysis fur- thermore suggests that transfer price documentation rules are instrumental in restricting income shifting activities. The effect is statistically significant and economically relevant. Our analysis thus underpins the benefits of im- plementing transfer price documentation requirements and suggests that they may be socially desirable despite the high administrative burden they impose on firms and tax authorities.