Offshore Profit Shifting and Domestic Productivity Measurement
U.S. labor productivity growth has slowed considerably, falling from 2.2 percent per year in 2000â€“04 to 0.63 percent per year in 2004â€“07. This slowdown took place primarily in sectors that either produce or use information technology (IT) services. At about the same time, U.S. multinational enterprises (MNEs) were accumulating considerable overseas earnings that were not being repatriated to the United States, distorting the return to intangible investments made in the United States. In this paper we ask: To what extent is the mismeasurement of MNE production responsible for the measured slowdown in productivity growth? Our preliminary results show that adjusting for the overseas production shifting of U.S. MNEs has a significant impact on measured productivity, particularly in IT-related industries that are research-and-development intensive â€” the industries that Fernald (2014) finds most responsible for the aggregate productivity slowdown. In the R&D intensive industries, our adjustment adds 5.1 percentage points to cumulative labor productivity growth in 1973â€“2014, and in IT-related R&D intensive industries, the cumulative gain in labor productivity is 4.5 percentage points. Notably, most of our adjustment happens after 2004, the period in which unadjusted productivity slows down.
|Date of creation:||2016|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
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- Altshuler, Rosanne & Grubert, Harry, 2010.
"Formula Apportionment: Is It Better Than the Current System and Are There Better Alternatives?,"
National Tax Journal,
National Tax Association, vol. 63(4), pages 1145-1184, December.
- Rosanne Altshuler & Harry Grubert, 2009. "Formula Apportionment: Is it better than the current system and are there better alternatives?," Working Papers 0901, Oxford University Centre for Business Taxation.
- Gordon, Roger H & Wilson, John Douglas, 1986. "An Examination of Multijurisdictional Corporate Income Taxation under Formula Apportionment," Econometrica, Econometric Society, vol. 54(6), pages 1357-1373, November. Full references (including those not matched with items on IDEAS)
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