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Productivity slowdown and tax havens: Where is measured value creation?

Jean-Charles Bricongne, Samuel Delpeuch and Margarita Lopez-Forero
Authors registered in the RePEc Author Service: Margarita Lopez Forero

Journal of International Economics, 2023, vol. 143, issue C

Abstract: Based on French firm-level data, we evaluate the contribution of the micro-level profit-shifting –through tax haven foreign direct investments– to the aggregate productivity slowdown measured in France. We show that firm measured productivity in France declines over the years following the establishment in a tax haven, with an average estimated drop by 3.5% in apparent labor productivity. To isolate the contribution of multinational enterprises' (MNEs) tax optimization to the decline in productivity, we then exploit the 2006 Cadbury-Schweppes decision of the European Court of Justice limiting the extent to which member States can counter European MNEs' tax planning strategies. We find that multinational groups benefiting from that loosening of the legal constraints do exhibit a lower labor productivity following that ruling. Finally, given these firms' weight, our results imply an annual loss of 5.7% in terms of the aggregate annual labor productivity growth.

Keywords: Tax havens; Profit-shifting FDI; Productivity slowdown; Productivity mismeasurement; Intangible capital (search for similar items in EconPapers)
JEL-codes: D33 F23 H26 H87 O47 (search for similar items in EconPapers)
Date: 2023
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Related works:
Working Paper: Productivity slowdown and tax havens: Where is measured value creation? (2023)
Working Paper: Productivity slowdown and tax havens: Where is measured value creation? (2023)
Working Paper: Productivity Slowdown and Tax Havens: Where Is Measured Value Creation? (2022) Downloads
Working Paper: Productivity Slowdown and Tax Havens: Where Is Measured Value Creation? (2022) Downloads
Working Paper: Productivity Slowdown and Tax Havens: Where Is Measured Value Creation? (2022) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:143:y:2023:i:c:s0022199623000430

DOI: 10.1016/j.jinteco.2023.103757

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