Global interconnectivity

This dissertation includes three empirical studies on tariff increases, investment relocation, and VAT fraud. My first study explores the impact of tariff increases on importer costs and the association between importer cost structure and tariff avoidance. I find a significant difference in the acquisition costs of tariff-affected importer firms compared to tariff-unaffected importer firms following tariff increases, with importer trader firms more likely to carry the burden of tariff increases than importer producer firms. I further find that importers with higher pre-treatment acquisition costs are likelier to avoid tariffs. My second study examines the impact of protectionist tariff increases on MNE investments. We find a significant decline in MNE investments in countries affected by tariffs. MNEs, with a certain degree of flexibility, can move more easily out of tariff-affected countries. However, we also see that these MNEs do not return investments to their home countries; instead, they locate in unaffected host countries. My third study examines the impact of on-time monitoring and information exchange on VAT fraud. While both policies reduce VAT fraud when mandated to all firms, the combination of on-time monitoring of e-invoices and information exchange on cross-border transactions is likely to reduce VAT fraud even further. These results hold significant importance for policymakers and researchers focused on the repercussions of fiscal policies intervening in global supply chains and combating cross-border fraudulent behavior.