Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/225291
Authors: 
Quint, Ansgar F.
Rudsinske, Jonas F.
Year of Publication: 
2020
Series/Report no.: 
cege Discussion Papers No. 406
Abstract: 
We study the welfare and distribution effects of corporate taxation and transfer pricing in an asymmetric general oligopolistic equilibrium trade model. Without profit shifting, an increasing profit tax rate shifts welfare towards the taxing country, where it also decreases real wages, whereas real wages rise in the other country. Labor income increases relative to profit income in both countries. Transfer pricing generates an additional benefit from exporting, such that companies want to expand production. Caused by this supply channel, real wages will rise in both countries. Due to shifting tax incomes, a cross-country demand channel relocates consumption from the high- to the low-tax country. In the low-tax country, real profits decrease such that the labor share of income rises.
Subjects: 
general oligopolistic equilibrium
international trade
labor share
profit shifting
tax evasion
transfer pricing
JEL: 
E25
F10
H25
H26
L13
Document Type: 
Working Paper

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