Transfer Pricing and Ownership Structure

Tommy Staahl Gabrielsen () and Guttorm Schjelderup ()

Norway; Department of Economics, University of Bergen from Department of Economics, University of Bergen

Abstract: We study the performance of jointly owned production units where upstream firms sell inputs to a downstream final market producer. It is found that, compared to integrated firms, co-ownership leads to overinvoicing of input prices (transfer prices), resulting in lower aggregate profits. Tax and tariff policy may lessen the organizational inefficiencies of jointly owned firms. The analysis suggests that firms must have other reasons for forming jointly owned production units than those guided by production efficiency and benefits from delegation of decision-making.

Keywords: PRICES; INTERNATIONAL AFFAIRS; OWNERSHIP (search for similar items in EconPapers)
JEL-codes: F23 L23 (search for similar items in EconPapers)
Date: 1999
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