NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Impact of Transfer Pricing on Intrafirm Trade

Kimberly A. Clausing

NBER Working Paper No. 6688
Issued in August 1998
NBER Program(s):   ITI   PE

Using data on the operations of U.S. parent firms and their foreign affiliates between 1982 and 1994, this paper examines the extent to which tax minimizing behavior influences intrafirm trade. The results indicate that taxes have a substantial influence on intrafirm trade flows between U.S. parent firms and their affiliates abroad; the United States has less favorable intrafirm trade balances with low tax countries. This result is anticipated if U.S. sales to affiliates in low tax countries are underpriced and U.S. purchases from affiliates in high tax countries are overpriced. Taxes are also shown to have an influence on intrafirm trade flows between different foreign affiliates of U.S. firms.

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Document Object Identifier (DOI): 10.3386/w6688

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