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Hidden Profits, Lost Jobs? Tax Havens and Employment Decisions

Author

Listed:
  • Ronald B. Davies
  • Margarita Lopez-Forero
  • Benjamin Michallet
  • Johannes Scheuerer

Abstract

Despite their advantages, multinational enterprises (MNEs) receive significant criticism, particularly with regard to offshoring jobs and shifting profits abroad to avoid taxation. Using administrative data for the universe of Norwegian and French firms and workers, we link these two issues by documenting a negative relation between MNE investment in a tax haven and employment in the high-tax country. In particular, exploiting the 2006 European Court of Justice (ECJ) decision on the Cadbury-Schweppes case which upheld the use of EU tax havens, we are able to establish a causal link in which tax haven use lowers domestic employment by 6%. Heterogeneity analyses reveal that the effects are mainly concentrated among high-skilled workers. We further link the employment changes to the substance requirements mandated by the ECJ's ruling and the secrecy inherent to tax havens.

Suggested Citation

  • Ronald B. Davies & Margarita Lopez-Forero & Benjamin Michallet & Johannes Scheuerer, 2026. "Hidden Profits, Lost Jobs? Tax Havens and Employment Decisions," CESifo Working Paper Series 12464, CESifo.
    • Handle: RePEc:ces:ceswps:_12464
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    More about this item

    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • 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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