We study whether proximity to the nearest tax haven affects FDI and the number of American affiliates in a tax haven. Our results show that distance to the nearest tax haven is positively related to FDI inflows and the number of American affiliates in tax havens. These findings suggest that there is a harmful competition between tax havens. We also find evidence of positive spillovers: the number of American affiliates in a tax haven is positively related to the number of in its closest neighboring tax haven. This suggests the presence of agglomeration benefits given there is an affiliate in a nearby tax haven.
Blanco, Luisa and Rogers, Cynthia, "Competition between Tax Havens: Does Proximity Matter?" (2011). Pepperdine University, School of Public Policy Working Papers. Paper 23.