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Publication type: Working paper – expertise – study
Title: Decomposing the margins of transfer pricing
Authors: Lassmann, Andrea
Zoller-Rydzek, Benedikt
et. al: No
DOI: 10.21256/zhaw-3170
Extent: 27
Issue Date: 2019
Series: KOF Working Papers
Series volume: 450
Publisher / Ed. Institution: ETH Zürich
Publisher / Ed. Institution: Zürich
Language: English
Subject (DDC): 338: Production
Abstract: This paper examines the determinants and margins of profit shifting through transferpricing. We develop a theory model, where transfer pricing patterns are governed by a generalized concealment cost function (CCF). Our empirical analysis draws on micro-level data about transaction-level imports, firm-level characteristics, as well as tax differentials between regions in Switzerland and countries abroad. We find, both theoretically and empirically, that more productive multinational firms deviate less from the arms’ length price and trade lower quantities, compared to MNEs with lower productivity. Moreover, the decision of firms to engage in transfer pricing depends negatively on a fixed cost component in the CCF, as well as trade costs. The model allows us to estimate a theory-consistent concealment cost function, which can be used for counterfactual analysis.
License (according to publishing contract): Licence according to publishing contract
Departement: School of Management and Law
Organisational Unit: International Management Institute (IMI)
Appears in collections:Publikationen School of Management and Law

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