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Measuring the Location of Production in a World of Intangible Productive Assets, FDI, and Intrafirm Trade

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  • Robert E. Lipsey

Abstract

As production comes to depend more on intangible productive assets, the location of production by multinational firms becomes increasingly ambiguous. The reason is that, within the firm, these assets have no clear geographical location, but only a nominal location determined by the firm's tax or legal strategies. The effects of these location ambiguities, and the resulting distortions for tax reasons of the location of production, are described and it is estimated that for U.S. firms' affiliates in a few tax havens alone, the exaggeration of value added in those locations amounted, in 2005, to about 4 percent of worldwide affiliate sales, and the exaggeration of sales to about 10 percent of worldwide affiliate sales. Some possibilities for estimating the location of production that could supersede the present dependence on accounting measures distorted by tax-saving policies are described.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14121.

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Date of creation: Jun 2008
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Publication status: published as Robert E. Lipsey, 2010. "Measuring The Location Of Production In A World Of Intangible Productive Assets, Fdi, And Intrafirm Trade," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages S99-S110, 06.
Handle: RePEc:nbr:nberwo:14121

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  1. James R. Hines Jr., 2005. "Do Tax Havens Flourish?," NBER Chapters, in: Tax Policy and the Economy, Volume 19, pages 65-100 National Bureau of Economic Research, Inc.
  2. Fuest, Clemens & Hemmelgarn, Thomas & Ramb, Fred, 2006. "How would formula apportionment in the EU affect the distribution and the size of the corporate tax base? An analysis based on German multinationals," Discussion Paper Series 1: Economic Studies 2006,20, Deutsche Bundesbank, Research Centre.
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Cited by:
  1. Benjamin Bridgman, 2009. "Do Intangible Assets Explain High U.S. Foreign Direct Investment Returns?," 2009 Meeting Papers, Society for Economic Dynamics 373, Society for Economic Dynamics.
  2. Griffith, Rachel & Miller, Helen & O'Connell, Martin, 2011. "Corporate taxes and the location of intellectual property," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8424, C.E.P.R. Discussion Papers.
  3. Olivier Godart & Holger Görg & David Greenaway, 2013. "Domestic multinationals, foreign affiliates, and labour demand elasticities," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 149(4), pages 611-630, December.
  4. Jörn Kleinert & Julien Martin & Farid Toubal, 2012. "The few leading the many: foreign affiliates and business cycle comovement," Globalization and Monetary Policy Institute Working Paper, Federal Reserve Bank of Dallas 116, Federal Reserve Bank of Dallas.
  5. Obstfeld, Maurice, 2011. "Financial Flows, Financial Crises, and Global Imbalances," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8611, C.E.P.R. Discussion Papers.
  6. Alice O. Nakamura & Leonard I. Nakamura & Masao Nakamura, 2012. "Building the Innovation Union: Lessons from the 2008 Financial Crisis," Working Papers 12-17, Federal Reserve Bank of Philadelphia.
  7. Escaith, Hubert, 2008. "Measuring trade in value added in the new industrial economy: statistical implications," MPRA Paper 14454, University Library of Munich, Germany.
  8. Robert C. Feenstra & Robert E. Lipsey & Lee G. Branstetter & C. Fritz Foley & James Harrigan & J. Bradford Jensen & Lori Kletzer & Catherine Mann & Peter K. Schott & Greg C. Wright, 2010. "Report on the State of Available Data for the Study of International Trade and Foreign Direct Investment," NBER Working Papers 16254, National Bureau of Economic Research, Inc.

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