Offshore Profit Shifting and Aggregate Measurement: Balance of Payments, Foreign Investment, Productivity, and the Labor Share
American Economic Review
vol. 112,
no. 6, June 2022
(pp. 1848-84)
Abstract
We show how offshore profit shifting by US multinational enterprises affects several key measures of the US economy. Profits shifted out of the United States grew rapidly from the mid-1990s to 2010 and have since waned. From 1982–2016, on average, 38 percent of income attributed to US direct investment abroad is reattributable to the United States. We find that adjusting for profit shifting shrinks the trade deficit, decreases the return on US foreign direct investment abroad, boosts productivity growth rates in the late 1990s and early 2000s, and lowers labor's share of income.Citation
Guvenen, Fatih, Raymond J. Mataloni Jr., Dylan G. Rassier, and Kim J. Ruhl. 2022. "Offshore Profit Shifting and Aggregate Measurement: Balance of Payments, Foreign Investment, Productivity, and the Labor Share." American Economic Review, 112 (6): 1848-84. DOI: 10.1257/aer.20190285Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E25 Aggregate Factor Income Distribution
- F14 Empirical Studies of Trade
- F23 Multinational Firms; International Business
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H87 International Fiscal Issues; International Public Goods
- L25 Firm Performance: Size, Diversification, and Scope