TY  - JOUR
AU  - Bosworth,Barry
AU  - Collins,Susan M.
AU  - Chodorow-Reich,Gabriel
TI  - Returns on FDI: Does the U.S. Really Do Better?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13313
PY  - 2007
Y2  - August 2007
UR  - http://www.nber.org/papers/w13313
L1  - http://www.nber.org/papers/w13313.pdf
N1  - Author contact info:
Barry Bosworth
Senior Fellow
The Brookings Institution
1775 Massachusetts Avenue
Washington, DC   20036
E-Mail: bbosworth@brookings.edu

Susan M. Collins
Joan and Sanford Weill Dean of Public Policy
Gerald R. Ford School of Public Policy
Weill Hall, Suite 4300
735 South State Street
Ann Arbor, MI   48109-3091
Tel: 734-763-2258
Fax: 734-763-9181
E-Mail: smcol@umich.edu

Gabriel I. Chodorow-Reich
UC, Berkeley
E-Mail: gabecr@econ.berkeley.edu
AB  - According to the U.S. external accounts, U.S. investors earn a significantly higher rate of return on their foreign investments than foreigners earn in the United States. This continued strong performance has produced a positive net investment income balance despite the deterioration in the U.S. net asset position in recent years. We examine the major competing explanations for the apparent differential between the rates of return. In particular, almost the entire difference occurs in FDI, where American firms operating abroad appear to earn a persistently higher return than that earned by foreign firms operating in the U.S. We first review a number of explanations in the literature for this differential. We then offer some new evidence on the role of income shifting between jurisdictions with varying rates of taxation. Using country-specific income and tax data, we find that about one-third of the excess return earned by U.S. corporations abroad can be explained by firms reporting "extra" income in low tax jurisdictions of their affiliates.
ER  -