The authors thank the editor, an anonymous referee, Wiji Arulampalam, Steve Bond, Thiess Buettner, Michael Devereux, Chris Heady, Clemens Fuest, Jenny Ligthart, Simon Loretz, Brian Poi and Alfons Weichenrieder for helpful comments as well as seminar participants at the Said Business School (Oxford University), the University of Warwick, the 2009 Annual Conference of the Royal Economic Society and the 2009 Annual Conference of the International Institute of Public Finance (IIPF). Financial support from the ESRC (ES/E003540/1) is gratefully acknowledged. An earlier version of the article was circulated under the title ‘Transfer-Pricing and Measured Productivity of Multinational Firms’.
Profit Shifting and Measured Productivity of Multinational Firms*
Article first published online: 25 OCT 2010
© Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2010
Oxford Bulletin of Economics and Statistics
Volume 73, Issue 1, pages 1–20, February 2011
How to Cite
Maffini, G. and Mokkas, S. (2011), Profit Shifting and Measured Productivity of Multinational Firms. Oxford Bulletin of Economics and Statistics, 73: 1–20. doi: 10.1111/j.1468-0084.2010.00610.x
- Issue published online: 7 JAN 2011
- Article first published online: 25 OCT 2010
- Final Manuscript Received: June 2010
(Samuel Palmisano (2006), IBM Chairman, President and CEO on the evolution of multinationals)
This article examines the differences in total factor productivity (TFP) between multinationals and domestic firms before and after tax rate changes. The aim is to investigate whether the host country corporate tax rate has a significant influence on the measured TFP advantage of multinational companies. Using a sample of approximately 16,000 European manufacturing firms (1998–2004), we find that a cut by 10 percentage points in the statutory corporate tax rate would increase multinationals’ measured TFP by about 10% relative to domestic firms, consistent with profit shifting by multinationals. At the sample mean, this would imply a 44% increase in the TFP advantage of multinationals.