Foreign Earnings Repatriations and Domestic Employment

Abstract

We examine the effect of large foreign earnings repatriations by U.S. multinational enterprises (MNEs) on employment. We show employment increased in geographic areas near the headquarters of MNEs that repatriated in connection with the American Jobs Creation Act of 2004. In addition to employment, we show repatriations are also associated with increases in per capita income and business establishments for these geographic areas. Our findings augment research that suggests repatriations have little, if any, direct effect on firm-level investment or hiring. These findings have implications for recent tax reforms, which change the incentives to repatriate foreign earnings to the U.S.

Keywords: Corporate Taxation, Repatriation, Employment

JEL Classification: H25, F23, J21