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NBER Working Papers and Publications
|April 2017||Offshore Profit Shifting and Domestic Productivity Measurement|
with Fatih Guvenen, Raymond J. Mataloni, Jr., Kim J. Ruhl: w23324
Official statistics display a significant slowdown in U.S. aggregate productivity growth that begins in 2004. In this paper, we investigate a source of mismeasurement in official statistics, which arises from offshore profit shifting by multinational enterprises operating in the United States. This profit shifting causes part of the economic activity generated by these multinationals to be attributed to their foreign affiliates, leading to an understatement of measured U.S. gross domestic product. Profit-shifting activity has increased significantly since the mid-1990s, resulting in an understatement of measured U.S. aggregate productivity growth. We construct adjustments to correct for the effects of profit shifting on measured gross domestic product. The adjustments raise aggregate produ...