Double Taxation Treaties’ Impact on Intermediate Trade

Abstract: The aim of this thesis is to investigate double taxation treaties impact on intermediate trade. Based on a panel data sample of five partner countries and 39 reporter countries over the period 1990-2012, the impact of signing DTTs on imports of intermediate trade in goods between two countries is analysed through a Gravity model. The main results show that DTT signing is associated with an increase in imports of intermediate goods. The baseline regression is estimated with OLS using fixed effects with logged values of intermediate trade as dependent variable, a bilateral mass variable of countries’ GDP, a dummy variable with unity 1 when signing a DTT and a distance variable, as explanatory ones. However, due to a large fraction of zero trade flows in the sample, the magnitude of the effect is hard to determine. To check for robustness when dealing with zero trade flows, methods for sample selection bias have been estimated. Despite this, signing DTTs appears to have a positive impact on intermediate trade. The findings further reveal the importance for future research to investigate how DTTs are affecting intermediate trade in the presents of selection bias.