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The Impact of Transfer Pricing on Intrafirm Trade

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  • Kimberly A. Clausing
Abstract
Using data on the operations of U.S. parent firms and their foreign affiliates between 1982 and 1994, this paper examines the extent to which tax minimizing behavior influences intrafirm trade. The results indicate that taxes have a substantial influence on intrafirm trade flows between U.S. parent firms and their affiliates abroad; the United States has less favorable intrafirm trade balances with low tax countries. This result is anticipated if U.S. sales to affiliates in low tax countries are underpriced and U.S. purchases from affiliates in high tax countries are overpriced. Taxes are also shown to have an influence on intrafirm trade flows between different foreign affiliates of U.S. firms.

Suggested Citation

  • Kimberly A. Clausing, 1998. "The Impact of Transfer Pricing on Intrafirm Trade," NBER Working Papers 6688, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6688
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    References listed on IDEAS

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    Cited by:

    1. Mihir A. Desai & James R. Hines, Jr., 2001. "The Uneasy Marriage of Export Incentives and the Income Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 15, pages 41-94, National Bureau of Economic Research, Inc.
    2. Sandrine Levasseur, 2002. "Investissements directs à l'étranger et stratégies des entreprises multinationales," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 103-152.
    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. Becker, Johannes & Davies, Ronald B. & Jakobs, Gitte, 2017. "The economics of advance pricing agreements," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 255-268.
    5. repec:hal:spmain:info:hdl:2441/3381 is not listed on IDEAS
    6. Ekholm, Karolina & Braconier, Henrik, 2001. "Foreign Direct Investment in Central and Eastern Europe: Employment Effects in the EU," CEPR Discussion Papers 3052, C.E.P.R. Discussion Papers.
    7. repec:hal:wpspec:info:hdl:2441/3381 is not listed on IDEAS
    8. repec:spo:wpmain:info:hdl:2441/3381 is not listed on IDEAS
    9. repec:spo:wpecon:info:hdl:2441/3381 is not listed on IDEAS
    10. Raymond Fisman & Shang-Jin Wei, 2004. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 471-500, April.
    11. Mijoč Ivo & Alić Martina Briš & Drvenkar Nataša, 2024. "What We Know So Far about Transfer Pricing: a Bibliometric Analysis," Zagreb International Review of Economics and Business, Sciendo, vol. 27(1), pages 253-282.
    12. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
    13. Dischinger, Matthias, 2008. "Profit Shifting by Multinationals and the Ownership Share: Evidence from European Micro Data," Discussion Papers in Economics 5661, University of Munich, Department of Economics.
    14. Liliana FELEAGA & Ioana NEAC?U, 2016. "Transfer pricing documentation – an efficient measure for combating the base erosion and profit shifting?," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 14(134), pages 183-183, January.

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