Taxes and Jobs within Multinational Firms

Abstract

Multinational corporations make up a large and increasing part of the global corporate landscape. These firms create links across borders, and recent literature shows that these links are important when thinking about the geographical location of profits. Much less is known about the importance of MNE links in moving real economic activity and jobs across borders. In this paper we look at whether tax conditions in one country drive employment and real activity in other countries through multinational firm links. Do jobs move within the multinational firm in response to taxes and if so which tax instruments are most important? The answers to these questions have implications for domestic tax policy design as well as for assessing sensitivity of the domestic economy and labour market to foreign policy choices. Joint paper with Sarah Clifford.