Wages and International Rent Sharing in Multinational Firms

Budd, John W.; Konings, Jozef; Slaughter, Matthew J.

doi:10.1162/0034653053327586

Cited by 188 publications

(186 citation statements)

References 41 publications

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“…However, in line with previous studies, we are not too concerned about this issue since the described misclassifications introduce noise to our estimations that will bias our results towards zero (see e.g. Budd et al, 2005).…”

Section: Data Setsupporting

confidence: 78%

Corporate taxes and the location of intangible assets within multinational firms

Dischinger¹,

Riedel

2011

Journal of Public Economics

379

221

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Intangible assets, like patents and trademarks, are increasingly seen as the key to competitive success and as the drivers of corporate profit. Moreover, they constitute a major source of profit shifting opportunities in multinational enterprises (MNEs) due to a highly intransparent transfer pricing process. This paper argues that for both reasons, MNEs have an incentive to locate intangible property at affiliates with a relatively low corporate tax rate. Using panel data on European MNEs and controlling for unobserved time-constant heterogeneity between affiliates, we find that the lower a subsidiary's tax rate relative to other affiliates of the multinational group the higher is its level of intangible asset investment. This effect is statistically and economically significant, even after controlling for subsidiary size and accounting for a dynamic intangible investment pattern.JEL classification: H25, F23, H26, C33

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Section: Data Setsupporting

confidence: 78%

Corporate taxes and the location of intangible assets within multinational firms

Dischinger¹,

Riedel

2011

Journal of Public Economics

379

221

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show abstract

“…However, in line with previous studies, this is not a serious concern since these misclassifications introduce noise to our estimations that will bias our results towards zero (see e.g. Budd, Konings and Slaughter, 2005).…”

supporting

confidence: 85%

Earnings shocks and tax-motivated income-shifting: Evidence from European multinationals

Dharmapala

Riedel

2013

Journal of Public Economics

227

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This paper presents a new approach to estimating the existence and magnitude of taxmotivated income shifting within multinational corporations. Existing studies of income shifting use changes in corporate tax rates as a source of identification. In contrast, this paper exploits exogenous earnings shocks at the parent firm and investigates how these shocks propagate across low-tax and high-tax multinational subsidiaries. This approach is implemented using a large panel of European multinational affiliates over the period [1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005]. The central result is that parents' positive earnings shocks are associated with a significantly positive increase in pretax profits at low-tax affiliates, relative to the effect on the pretax profits of high-tax affiliates. The result is robust to controlling for various other differences between low-tax and high-tax affiliates and for country-pair-year fixed effects. Additional tests suggest that the estimated effect is attributable primarily to the strategic use of debt across affiliates. The magnitude of income shifting estimated using this approach is substantial, but somewhat smaller than that found in the previous literature. Acknowledgments:We thank participants at the

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“…by Budd, Konings, and Slaughter (2005). 22 A detailed discussion on how firm-level rent-sharing alters the equations in Section 2 is deferred to a supplement, which is available upon request.…”

mentioning

confidence: 99%

Offshoring domestic jobs

Egger

Kreickemeier

Wrona

2015

Journal of International Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe set up a two-country general equilibrium model, in which heterogeneous firms from one country (the source country) can offshore routine tasks to a low-wage host country. The most productive firms self-select into offshoring, and the impact on welfare in the source country can be positive or negative, depending on the share of firms engaged in offshoring. Each firm is run by an entrepreneur, and inequality between entrepreneurs and workers as well as intra-group inequality among entrepreneurs is higher with offshoring than in autarky.All results hold in a model extension with firm-level rent sharing, which results in aggregate unemployment. In this extended model, offshoring furthermore has non-monotonic effects on unemployment and intra-group inequality among workers. The paper also offers a calibration exercise to quantify the effects of offshoring.JEL-Classification: F12, F16, F23

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Wages and International Rent Sharing in Multinational Firms

Cited by 188 publications

References 41 publications

Corporate taxes and the location of intangible assets within multinational firms

Corporate taxes and the location of intangible assets within multinational firms

Earnings shocks and tax-motivated income-shifting: Evidence from European multinationals

Offshoring domestic jobs

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