Labor Market Consequences of Antitax Avoidance Policies

Katarzyna Bilicka

No 21-354, Upjohn Working Papers from W.E. Upjohn Institute for Employment Research

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. This affected London-based service sector firms the most. I show that this led to a reduction in the number of jobs available in regions exposed to the reform in the United Kingdom. In foreign countries, the initial reallocation of labor across firms resulted in a much 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 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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