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Multinational Profit Shifting and Measures throughout Economic Accounts

In: Challenges of Globalization in the Measurement of National Accounts

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  • Jennifer Bruner
  • Dylan G. Rassier
  • Kim J. Ruhl
Abstract
Profit shifting to low-tax countries imposes challenges for the treatment of multinational enterprises in economic accounts. Using adjustments for profit shifting calculated in Guvenen et al. (2017) under an alternative measurement methodology, this paper empirically demonstrates how the effects of profit shifting cascade throughout a fully articulated set of economic accounts for the United States in 2014. We find a 1.5 percent and 3.5 percent increase in measured U.S. gross domestic product and operating surplus, respectively, and a 33.5 percent decrease in measured income receivable from the rest of world. As a result of offsetting effects, measured U.S. gross national saving decreases by 0.8 percent, and national borrowing increases by 6.9 percent. There are also potentially significant implications for analytic uses of the measures, including decreases for the labor share of income and the return on U.S. direct investment abroad and increases for the trade in services balance and the return on domestic non-financial business.
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  • Jennifer Bruner & Dylan G. Rassier & Kim J. Ruhl, 2018. "Multinational Profit Shifting and Measures throughout Economic Accounts," NBER Chapters, in: Challenges of Globalization in the Measurement of National Accounts, pages 153-205, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14142
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    Cited by:

    1. Raymond Mataloni & Kim Ruhl & Dylan Rassier & Fatih Guvenen, 2016. "Offshore Profit Shifting and Domestic Productivity Measurement," 2016 Meeting Papers 1382, Society for Economic Dynamics.
    2. Vincent Vicard, 2019. "The Exorbitant Privilege of High Tax Countries," Working Papers 2019-06, CEPII research center.
    3. Dorian Carloni & Daniel Fried & Molly Saunders-Scott, 2019. "The Effect of Tax-Motivated Transfer Pricing on U.S. Aggregate Trade Statistics: Working Paper 2019-05," Working Papers 55284, Congressional Budget Office.
    4. Ergen, Timur & Kohl, Sebastian & Braun, Benjamin, 2021. "Firm foundations: The statistical footprint of multinational corporations as a problem for political economy," MPIfG Discussion Paper 21/5, Max Planck Institute for the Study of Societies.
    5. Fetzer, James, 2018. "BEA Initiatives to Improve and Interpret Its Statistics on Trade in Services and Global Production," Conference papers 332932, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Hayato Kato & Hirofumi Okoshi, 2022. "Economic Integration And Agglomeration Of Multinational Production With Transfer Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 1325-1355, August.
    7. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    8. Thomas Tørsløv & Ludvig Wier & Gabriel Zucman, 2023. "The Missing Profits of Nations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(3), pages 1499-1534.
    9. Duncan van Limbergen, 2020. "Revisiting the income balance. What makes EU tax havens different?," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Bridging measurement challenges and analytical needs of external statistics: evolution or revolution?, volume 52, Bank for International Settlements.
    10. Niamh Holton & Margaret Kinsella & Oisín Mangan & Shaun McLaughlin & Patrick Quill, 2020. "Consistency in a Globalised Economy: Aligning the Treatment of R&D in the Irish National Accounts and Balance of Payments," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 517-518-5, pages 191-204.
    11. Nadia Accoto & Stefano Federico & Giacomo Oddo, 2023. "Trade in services related to intangibles and the profit shifting hypothesis," Temi di discussione (Economic working papers) 1414, Bank of Italy, Economic Research and International Relations Area.
    12. Joyce, Joseph, 2021. "The International Distribution of FDI Income And Its Impact on Income Inequality," MPRA Paper 106448, University Library of Munich, Germany.
    13. Ana Maria Santacreu, 2019. "International Technology Licensing, Intellectual Property Rights, and Tax Havens," Working Papers 2019-031, Federal Reserve Bank of St. Louis, revised 08 Sep 2023.
    14. Marie-Baïanne Khder & Jérémi Montornès & Nicolas Ragache, 2020. "Irish GDP Growth in 2015: A Puzzle and Propositions for a Solution," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 517-518-5, pages 173-190.
    15. Vincent Vicard, 2023. "Profit Shifting, Returns on Foreign Direct Investments and Investment Income Imbalances," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(2), pages 369-414, June.
    16. Wang, Zi, 2020. "Multinational production and corporate taxes: A quantitative assessment," Journal of International Economics, Elsevier, vol. 126(C).
    17. Joyce, Joseph, 2022. "The Impact of FDI Income on Income Inequality in Home Countries," MPRA Paper 114564, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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