Taxation and the Sources of Growth: Estimates from United States Multinational Corporations

Jason Cummins ()

No 6533, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Capital income tax policy affects investment by the parent and affiliates of multinational corporations (MNCs). In a model in which technical advances are embodied in new capital, investment will translate directly into productivity gains. In this paper, I use this framework to guide the growth accounting decomposition and clarify the relationship between capital growth and overall firm growth. A semiparametric technique is used to correct for the usual bias that afflicts production function parameter estimates. These estimates are used to analyze the sources of MNC's growth. Three findings stand out: (1) growth in parent and affiliate capital are the most important sources of growth, with FDI contributing more to growth than the sum of the contributions of parent and affiliate employment, and materials; (2) productivity has boomed since 1992, due to productivity growth in MNCs with Canadian affiliates; (3) the investment elasticity of productivity growth is large and adjustment costs of investment are small, suggesting that changes in the after-tax price of capital result in robust investment which translates directly into productivity gains.

JEL-codes: C14 D24 (search for similar items in EconPapers)
Date: 1998-04
New Economics Papers: this item is included in nep-ecm
Note: PE
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Citations: View citations in EconPapers (1)

Published as Jason G. Cummins, 2000. "Taxation and the Sources of Growth: Estimates from U.S. Multinational Corporations," NBER Chapters, in: International Taxation and Multinational Activity, pages 231-264 National Bureau of Economic Research, Inc.

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Working Paper: Taxation and the Sources of Growth: Estimates from United States Multinational Corporations (1998)
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