Farid Toubal

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  Working Papers  

Profit Shifting Friction and Geography of Multinational Activity

with Alessandro Ferrari, Sébastien Laffitte, and Mathieu Parenti

 

Abstract: International tax rules are commonly viewed as obsolete as multinational corporations exploit loopholes to move their profits to tax havens. This paper uncovers how international tax reforms can curb profit shift- ing and impact real income and welfare across nations. We introduce profit shifting and corporate taxation in a quantitative model of multinational production. The model delivers "triangle identities" through which we recover bilateral profit-shifting flows. Our estimates of both tax-base and profit-shifting elasticities, together with profit-shifting frictions, govern how taxes shape the geography of production and profits. Our model accommodates a rich set of corporate taxation scenarios. A global minimum tax would be beneficial for welfare since it would increase the public good provision and encourage countries to raise their statutory corporate tax rates. Instead, a border-adjustment tax that eliminates profit shifting could result in welfare losses.

 

CEPR Discussion Paper 17801


Corporate Tax Avoidance and sales: micro evidence and aggregate implications

with Julien Martin and Mathieu Parenti

 

This paper investigates the influence of corporate tax avoidance (CTA) on firm-level sales, and its aggregate implications. CTA gives a competitive advantage to avoiding firms, which affects the distribution of sales in the economy. Using three identication strategies, we find a causal impact of CTA on sales in US rm-level data. In the US, CTA increased more among the largest firms, which has reinforced their dominant position. In key industries, trends in CTA explain 10%-30% of the increase in concentration from 1994 to 2017. Further analysis shows the impact of CTA-induced distortions on industrial output is relevant at a macroeconomic scale.

 

CEPR Discussion Paper 15060

New Version


One Nation, One Language ? Domestic Language Diversity, Trade and Welfare

with Tamara Gurevich, Peter H. Hermann and Yoto Yotov

 

Abstract: Using new data on linguistic diversity across and within countries, we examine novel channels though which language affects trade patterns and economic welfare. We find that linguistic similarity within a country accounts for about 10 percent of estimated 'home bias', demonstrating the importance of shared languages for domestic integration. To highlight the general equilibrium implications of domestic language proximity, we simulate the repeal of Quebec's Bill 101, which made French an official language in Canada and established fundamental language rights for French-speakers. The analysis demonstrates that domestic language diversity has significant implications for Canada's welfare but also sizable economic consequences that stretch far beyond its borders.

CEPR Discussion Paper 15701


Techies, Trade, and Skill-Biased Productivity

with James Harrigan and Ariell Reshef

 

Abstract: We study the impact of firm level choices of ICT, R&D, exporting and importing on the evolution of productivity and its bias towards skilled occupations. We use a novel measure of the propensity of a firm to engage in technology investment and adoption: its employment of workers with STEM (science, technology, engineering and math) skills and experience who we call "techies". We develop a methodology for estimating firm level productivity that allows us to measure both Hicks-neutral and skill-augmenting technology differences, and apply this to administrative data on French firms in the entire private sector from 2009 to 2013. We find that techies and importing of intermediate inputs raise skill-biased productivity, while imports also raise Hicks-neutral productivity. We also nd that higher firm-level skill biased productivity raises low-skill employment even as it raises the ratio of skilled to unskilled workers. This is because of the cost-reducing effect of higher productivity. The techie and trade effects are large, and can account for much of the aggregate increase in skilled employment from 2009 to 2013.

NBER Working Paper 25295 (November 2018)