Abstract
This study investigates the effect of bilateral tax treaty (BTT) network centrality on countries’ global value chain (GVC) positions using a panel dataset of 62 economies from 2007 to 2021. Employing an instrumental variable approach, we find that higher BTT network centrality reduces a country's overall GVC position, with heterogeneous effects across sectors and participation types (forward and backward). The results suggest that increased BTT network centrality may facilitate production fragmentation and enable tax planning strategies (treaty shopping), leading to a distortion in the distribution of value-added across countries in GVCs.
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