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Transfer Pricing by U.S.-Based Multinational Firms

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Listed author(s):
  • Andrew B. Bernard
  • J. Bradford Jensen
  • Peter K. 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12493.

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Date of creation: Aug 2006
Handle: RePEc:nbr:nberwo:12493
Note: IO ITI PE
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Find related papers by JEL classification:
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
  • 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

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