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Transfer Pricing by U.S.-Based Multinational Firms

Author Info

Listed author(s):
  • Andrew Bernard
  • J. Bradford Jensen
  • Peter Schott

Abstract

This paper examines how prices set by multinational firms vary across arm’s-length and related party customers. Comparing prices within firms, products, destination countries, modes of transport and month, we find that the prices U.S. exporters set for their arm’s-length customers are substantially larger than the prices recorded for related-parties. This price wedge is smaller for commodities than for differentiated goods, is increasing in firm size and firm export share, and is greater for goods sent to countries with lower corporate tax rates and higher tariffs. We also find that changes in exchange rates have differential effects on arm’s-length and related-party prices; an appreciation of the dollar reduces the difference between the prices.

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File URL: https://www2.census.gov/ces/wp/2008/CES-WP-08-29.pdf
File Function: First version, 2008
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 08-29.

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Length: 37 pages
Date of creation: Sep 2008
Handle: RePEc:cen:wpaper:08-29
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More information through EDIRC

Keywords: Related party trade; Corporate taxes; Intrafirm trade; Arm’s-length sales; Tariffs; Market structure; Pricing-to-market;

Other versions of this item:

Find related papers by JEL classification:
  • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
  • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
  • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

References listed on IDEAS
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  1. repec:bla:joares:v:36:y:1998:i:2:p:209-229 is not listed on IDEAS
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