Labor market consequences of antitax avoidance policies

Katarzyna Bilicka

International Tax and Public Finance, 2025, vol. 32, issue 2, No 4, 429-465

Abstract: Abstract In this paper, I analyze the local labor market consequences of multinational firms reallocating employees across their affiliates in response to antitax avoidance policies. I leverage the introduction of a worldwide debt cap in 2010 in the United Kingdom as a quasi-natural experiment that limited one of the forms of profit shifting—debt shifting—for a group of multinational corporations (MNCs). Multinationals affected by the reform reallocated their employees from the United Kingdom to foreign locations. I show that this led to a reduction in employment in regions more exposed to the reform in the United Kingdom. In foreign countries, the initial reallocation of labor across firms resulted in a relatively larger expansion of the affected local labor markets. These results suggest that a reallocation of labor across firms generates asymmetries in how negative and positive firm-level shocks are amplified through regional markets.

Keywords: Debt shifting; Multinational companies; Local labor markets (search for similar items in EconPapers)
JEL-codes: H25 H26 J21 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Labor Market Consequences of Antitax Avoidance Policies (2021)
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DOI: 10.1007/s10797-024-09838-9

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