Offshore Profit Shifting and Domestic Productivity Measurement

55 Pages Posted: 17 Apr 2017

See all articles by Fatih Guvenen

Fatih Guvenen

University of Minnesota - Department of Economics; National Bureau of Economic Research (NBER)

Raymond J. Mataloni

U.S. Department of Commerce

Dylan G. Rassier

Bureau of Economic Analysis

Kim Ruhl

Pennsylvania State University, College of the Liberal Arts - Department of Economic

Date Written: April 2017

Abstract

Beginning in 2004, official statistics display a slowdown in U.S. productivity growth. We show how offshore profit shifting by U.S. multinational enterprises affects GDP and, thus, productivity measurement. Profit shifting increased in the mid- 1990s, resulting in lower measured productivity growth. We construct value added adjusted for profit shifting. The adjustments raise aggregate productivity growth rates by 0.09 percent annually for 1994–2004, 0.24 percent annually for 2004–2008, and lower annual aggregate productivity growth rates by 0.09 percent after 2008. The adjustments are large in R&D-intensive industries, where value added increases by as much as 8 percent in the mid-2000s.

Suggested Citation

Guvenen, Fatih and Mataloni, Raymond J. and Rassier, Dylan G. and Ruhl, Kim, Offshore Profit Shifting and Domestic Productivity Measurement (April 2017). NBER Working Paper No. w23324. Available at SSRN: https://ssrn.com/abstract=2953811

Fatih Guvenen (Contact Author)

University of Minnesota - Department of Economics ( email )

Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Raymond J. Mataloni

U.S. Department of Commerce ( email )

Bureau of Economic Analysis (BEA)
Washington, DC
United States

Dylan G. Rassier

Bureau of Economic Analysis ( email )

1441 L Street NW
Washington, DC 20910
United States

Kim Ruhl

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States

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