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Accurate policy evaluation is central to optimal policymaking, but difficult to achieve. Most often, analysts have to work with observational data and cannot directly observe the counterfactual of a policy to assess its effect accurately. In this paper, we craft a quasi‐experimental design and apply two relatively new methods—the difference‐in‐differences estimation and the synthetic controls method—to the policy debate on whether corporate tax cuts increase foreign direct investment (FDI). The taxation–FDI relationship has attracted wide attention because of mixed findings. We exploit a quasi‐experimental design for Russian regions, which were granted autonomy to reduce corporate profit tax in 2003, enabling them to simultaneously experiment with different tax policies. We estimate both the average and local treatment effects of two types of tax cuts on FDI inflows. We find that, on average, relative to the absence of tax cuts, nondiscriminatory tax cuts on direct investment profit increase FDI, but discriminatory tax cuts on selected government‐sanctioned investment projects do not. Yet for both types of tax cuts, local treatment effects vary dramatically from region to region. Our research has important implications for the design of tax policy and fiscal incentive, and the assessment of fiscal policy reforms.

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This paper examines whether social spending cushions the effect of globalization on within‐country inequality. Using information on disposable and market income inequality and data on overall social spending, and health and education spending from the ILO and the World Bank/WHO, we analyze whether social spending moderates the association between economic globalization and inequality. The results confirm that economic globalization—especially economic flows—associates with higher income inequality, an effect driven by non‐OECD countries. Health spending is strongly associated with lower inequality, but we find no robust evidence that any kind of social spending negatively moderates the association between economic globalization and inequality.

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