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Profit Shifting and Measured Productivity of Multinational Firms *
Author(s) -
Maffini Giorgia,
Mokkas Socrates
Publication year - 2011
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.2010.00610.x
Subject(s) - total factor productivity , multinational corporation , corporate tax , productivity , sample (material) , profit (economics) , economics , business , international trade , monetary economics , international economics , labour economics , tax reform , market economy , macroeconomics , finance , tax avoidance , chemistry , chromatography , microeconomics
‘ The global integration of production cuts costs and taps new sources of skills and knowledge ’ (Samuel Palmisano (2006), IBM Chairman, President and CEO on the evolution of multinationals) Abstract 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.