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Transfer-pricing and Measured Productivity of Multinational Firms

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Author Info
Giorgia Maffini () (Oxford University Centre for Business Taxation)
Socrates Mokkas () (Oxford University Centre for Business Taxation)
Abstract

This paper examines the diferences in total factor productivity (TFP) between multinationals and domestic firms before and after tax rate changes to investigate whether the host country corporate tax rate has a significant influence on the measured TFP advantage of multinational companies. Using a difference-in-differences approach on a sample of approximately 16,000 European firms (1998-2004), we find that a 10 percentage points cut in the statutory corporate tax rate would increase multinationals' measured TFP by about 10% relative to domestic firms, consistent with profit-shifting by multinationals. At the sample mean, this would imply a 44% increase in the TFP advantage of multinationals.

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Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0817.

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Date of creation: 2008
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Handle: RePEc:btx:wpaper:0817

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Related research
Keywords: multinational firms; total factor productivity; corporate taxation; profit shifting;

Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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  1. Van Biesebroeck, Johannes, 2008. "The Sensitivity of Productivity Estimates," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 311-328. [Downloadable!] (restricted)
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  3. Davide Castellani & Antonello Zanfei, 2007. "Internationalisation, Innovation and Productivity: How Do Firms Differ in Italy?," The World Economy, Blackwell Publishing, vol. 30(1), pages 156-176, 01. [Downloadable!] (restricted)
  4. Huizinga, Harry & Laeven, Luc, 2008. "International profit shifting within multinationals: A multi-country perspective," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1164-1182, June. [Downloadable!] (restricted)
  5. Kyoji Fukao & Keiko Ito & Hyeog Ug Kwon & Miho Takizawa, 2006. "Cross-Border Acquisitions and Target Firms' Performance: Evidence From Japanese Firm-Level Data," NBER Working Papers 12422, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Eric J. Bartelsman & Mark Doms, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September. [Downloadable!] (restricted)
    Other versions:
  8. Chiara Criscuolo & Ralf Martin, 2004. "Multinationals and U.S. Productivity Leadership: Evidence from Great Britain," OECD Science, Technology and Industry Working Papers 2004/5, OECD, Directorate for Science, Technology and Industry. [Downloadable!]
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  9. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2006. "Transfer Pricing by U.S.-Based Multinational Firms," NBER Working Papers 12493, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer, vol. 43(3), pages 135-148, May. [Downloadable!] (restricted)
  11. Michael P Devereux, 2007. "The Impact of Taxation on the Location of Capital, Firms and Profit: a Survey of Empirical Evidence," Working Papers 0702, Oxford University Centre for Business Taxation. [Downloadable!]
  12. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Blackwell Publishing, vol. 47(4), pages 451-76, December. [Downloadable!] (restricted)
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  13. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258 National Bureau of Economic Research, Inc. [Downloadable!]
  14. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March. [Downloadable!] (restricted)
  15. Arnold, Jens Matthias & Hussinger, Katrin, 2006. "Exports versus FDI in German manufacturing: firm performance and participation in international markets," Discussion Paper Series 1: Economic Studies 2006,04, Deutsche Bundesbank, Research Centre. [Downloadable!]
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