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Labor market consequences of antitax avoidance policies

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  • Katarzyna Bilicka

    (Utah State University)

Abstract

In this paper, I analyze the local labor market consequences of multinational firms reallocating employees across their affiliates in response to antitax avoidance policies. I leverage the introduction of a worldwide debt cap in 2010 in the United Kingdom as a quasi-natural experiment that limited one of the forms of profit shifting—debt shifting—for a group of multinational corporations (MNCs). Multinationals affected by the reform reallocated their employees from the United Kingdom to foreign locations. I show that this led to a reduction in employment in regions more exposed to the reform in the United Kingdom. In foreign countries, the initial reallocation of labor across firms resulted in a relatively larger expansion of the affected local labor markets. These results suggest that a reallocation of labor across firms generates asymmetries in how negative and positive firm-level shocks are amplified through regional markets.

Suggested Citation

  • Katarzyna Bilicka, 2025. "Labor market consequences of antitax avoidance policies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(2), pages 429-465, April.
  • Handle: RePEc:kap:itaxpf:v:32:y:2025:i:2:d:10.1007_s10797-024-09838-9
    DOI: 10.1007/s10797-024-09838-9
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    1. Jaqueline Hansen & Valeria Merlo & Georg Wamser, 2023. "Taxes, Profit Shifting, and the Real Activities of MNEs: Evidence from Corporate Tax Notches," CESifo Working Paper Series 10593, CESifo.

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    More about this item

    Keywords

    Debt shifting; Multinational companies; Local labor markets;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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