Multinational Profit Shifting and Measures throughout Economic Accounts

Jennifer Bruner, Dylan G. Rassier, Kim J. Ruhl

NBER Working Paper No. 24915
Issued in August 2018
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, International Trade and Investment

Profit shifting to low-tax countries imposes challenges for the treatment of multinational enterprises in economic accounts. Using adjustments for profit shifting calculated in Guvenen et al. (2017) under an alternative measurement methodology, this paper empirically demonstrates how the effects of profit shifting cascade throughout a fully articulated set of economic accounts for the United States in 2014. We find a 1.5 percent and 3.5 percent increase in measured U.S. gross domestic product and operating surplus, respectively, and a 33.5 percent decrease in measured income receivable from the rest of world. As a result of offsetting effects, measured U.S. gross national saving decreases by 0.8 percent, and national borrowing increases by 6.9 percent. There are also potentially significant implications for analytic uses of the measures, including decreases for the labor share of income and the return on U.S. direct investment abroad and increases for the trade in services balance and the return on domestic non-financial business.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w24915

Forthcoming: Multinational Profit Shifting and Measures throughout Economic Accounts, Jennifer Bruner, Dylan G. Rassier, Kim J. Ruhl. in The Challenges of Globalization in the Measurement of National Accounts, Ahmad, Moulton, Richardson, and van de Ven. 2020