This paper stresses the special role of multinational headquarters in corporate profit shifting strategies. Using a large panel of European firms, we show that multinational enterprises (MNEs) are reluctant to shift profits away from their headquarters even if these are located in high-tax...

We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result,...

This paper analyzes measures that limit firms’ profit shifting activities in a model that incorporates heterogeneous firm productivity and monopolistic competition. Such measures, e.g. thin capitalization rules, have become increasingly widespread as governments have reacted to growing profit...

According to several psychological and economic studies, non-binding communication can be an effective tool to increase trust and enhance cooperation. This paper focuses on reasons why people stick to a given promise and analyzes to what extent image concerns of being perceived as a promise...

We develop a model relating self-control, risk preferences and conflict identification to cooperation patterns in social dilemmas. We subject our model to data from an experimental public goods game and a risk experiment, and we measure conflict identification and self-control. As predicted, we...

Empirical work on Akerlof’s theory of gift exchange in labor markets has concentrated on the fair wage-effort hypothesis. In fact, however, the theory also contains a social component that stipulates that homogenous agents that are employed for the same wage level will exert more effort,...

Following recent court rulings, cross-border loss compensation for multinational firms will likely be introduced, at least in Europe. This paper analyzes the effects of introducing a coordinated cross-border tax relief in a setting where multinational firms choose the size of a risky investment...

Auctions often involve goods exhibiting a common knowledge ex-post risk that is independent of buyers’ private values or their signals regarding common value components. Esö and White (2004) showed theoretically that ex-post risk leads to precautionary bidding for DARA bidders: Agents reduce...

In this paper we focus on the compliance effects of tax regime changes. According to the economic model of tax evasion, a tax reform should affect compliance through its impact on tax rates and incentives. Our findings demonstrate the importance of at least two further effects not covered by the...

We provide indirect empirical evidence of profit shifting behavior by multinational enterprises (MNEs) employing a panel study for the years 1995 to 2005, while controlling for unobservable fixed firm effects. We use a large micro database of European MNEs which includes detailed accounting and...