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

Jean-Charles Bricongne, Samuel Delpeuch () and Margarita Lopez-Forero ()
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Samuel Delpeuch: ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Margarita Lopez-Forero: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay
Authors registered in the RePEc Author Service: Margarita Lopez Forero

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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)
Date: 2023-07
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Published in Journal of International Economics, 2023, 143, pp.103757. ⟨10.1016/j.jinteco.2023.103757⟩

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Journal Article: 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)
Working Paper: Productivity Slowdown and Tax Havens: Where Is Measured Value Creation? (2022)
Working Paper: Productivity Slowdown and Tax Havens: Where Is Measured Value Creation? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04171843

DOI: 10.1016/j.jinteco.2023.103757

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