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Transfer Prices, Tariffs, and Content Restrictions
Author(s) -
Madan Vibhas
Publication year - 1998
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00131
Subject(s) - multinational corporation , economics , tariff , international economics , transfer (computing) , monetary economics , transfer pricing , microeconomics , finance , parallel computing , computer science
The efficacy of a local content requirement as an employment enhancing policy in the host country is weakened in the presence of transfer price manipulation by a vertically and horizontally integrated multinational firm. For given host and foreign country tax rates, there is a threshold tariff above which the aggregate real effects of transfer price manipulation are unambiguous and below which these effects are ambiguous. Stricter content restrictions reduce benefits to host country factors, and higher tariffs increase benefits to host country factors in the presence of resale price constraints and endogenous‐limit transfer prices.