Offshore Profit Shifting and Domestic Productivity Measurement

By Fatih Guvenen, Raymond J. Mataloni, Dylan G. Rassier, Kim J. Ruhl. 2017

130 citations recorded by the source corpus.

Official statistics display a significant slowdown in U.S. aggregate productivity growth that begins in 2004. We show how offshore profit shifting by U.S. multinational enterprises affects GDP and, thus, productivity measurement. Under international statistical guidelines, profit shifting causes part of U.S. production generated by multinationals to be excluded from official measures of U.S. production. Profit shifting has increased significantly since the mid-1990s, resulting in lower measures of U.S. aggregate productivity growth. We construct an alternative measure of value added that adjusts for profit shifting. The adjustments raise aggregate productivity growth rates by 0.09 percent annually for 1994-2004, 0.24 percent annually for 2004-2008, and lowers annual aggregate productivity growth rates by 0.09 percent after 2008. Our adjustments mitigate, but do not eliminate, the measured productivity slowdown. The adjustments are especially large in R&D-intensive industries, which most likely produce intangible assets that facilitate profit shifting. The adjustments boost value added in these industries by as much as 8 percent in the mid-2000s.

View Paper: https://www.semanticscholar.org/paper/9558a6bb3990019b6499a0d4f7f7ed44faf0f1a7

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Citations in the corpus

• INTERNATIONAL CORPORATE TAX AVOIDANCE: A REVIEW OF THE CHANNELS, MAGNITUDES, AND BLIND SPOTS (2018, unknown): “6 Transfer mispricing has also implications for national accounts statistics and the measurement of GDP growth, see e.g. Guvenen et al (2017).”
• Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens (2020, unknown): “Our article contributes to a growing literature on the economic impact of tax havens, including Hines and Rice (1994), Desai, Foley, and Hines (2004), Gravelle (2009), Zucman (2013), Guvenen et al. (2018), and Tørsløv, Wier, and Zucman (2018).”
• Functional specialisation in trade (2018, background): “…this income is notoriously hard to track, not least D ow nloaded from https://academ ic.oup.com /joeg/article-abstract/19/1/1/5210032 by U niversity of G roningen user on 05 February 2019 because of the notional relocation of profits for tax accounting purposes (Lipsey, 2010; Guvenen et al., 2017).”