ECONOMIC INTEGRATION AND AGGLOMERATION OF MULTINATIONAL PRODUCTION WITH TRANSFER PRICING

• 成果类型: Article
• 署名作者: Kato, Hayato; Okoshi, Hirofumi
• 署名单位: University of Osaka; University of Munich; Okayama University
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12569
• 发表日期: 2022
• 页码: 1325-1355
• 关键词: arms length principle; corporate-tax systems; heterogeneous firms; Transfer prices; simple-model; COMPETITION; taxation; location; rules; size

摘要

Do low corporate taxes always favor multinational production over economic integration? We propose a two-country model in which multinationals choose the locations of production plants and foreign distribution affiliates and shift profits between them through transfer prices. With high trade costs, plants are concentrated in the low-tax country; surprisingly, this pattern reverses with low trade costs. Indeed, economic integration has a nonmonotonic impact: Falling trade costs first decrease and then increase the plant share in the high-tax country, which we empirically confirm. Moreover, allowing for transfer pricing makes tax competition tougher and international coordination on transfer-pricing regulation can be beneficial.