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...

Wage formation is often analyzed by assuming that wage differentials reflect productivity differentials intrinsic to the workers, like differences in skill or qualification. Observed industry and firm effects on wages suggests, however, that wage differentials may result from causes rather...

This paper develops a theory of stagflation, based on turnover-efficiency-wage theory. In these theories, wages are forward-looking, i.e., set to keep incumbents with the firm. The employed workers apply for better jobs and compete with unemployed applicants. An employed applicant is, however,...

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...

A labor market is considered that is characterized by job competition over job ladders. Firms paying more for comparable jobs can attract workers with better background characteristics (with general human capital) and will lose fewer trained workers (with general and firm-specific human...

A firm may reduce its turnover and the entailed turnover costs by raising wages. A rise in unemployment reduces turnover and turnover costs in a similar way. The interaction of these effects leads – in presence of perfectly flexible wages – to a stable equilibrium in the labor market which...

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...

A firm that faces insufficient supply of labor can either increase the wage offer to attract more applicants, or reduce the hiring standard to enlarge the pool of potential employees, or do both. This simultaneous adjustment of wages and hiring standards has been emphasized in a classical...

We provide indirect empirical evidence of profit shifting behavior by multinational enterprises. This issue is analyzed in an econometric panel study for the years 1995 to 2005 and additionally in a cross-section for 2004 using a large micro database of European subsidiaries of multinationals...