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Perverse Intra-Firm Trade

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  • Kant, Chander

Abstract

This paper shows that linkages between domestic costs and direction of intra-firm trade break down when the multinational firms (MNFs) face tax rate differentials. Thus, in the context of MNFs, conclusions drawn on the assumption of equal or nonexistent tax rates cannot be assumed to extend to the general case of unequal tax rates. Further, saving on profit taxes itself can be a powerful motive for internalisation.

Suggested Citation

  • Kant, Chander, 1989. "Perverse Intra-Firm Trade," MPRA Paper 90776, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:90776
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    File URL: https://mpra.ub.uni-muenchen.de/90776/1/MPRA_paper_90776.pdf
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    References listed on IDEAS

    as
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    4. Kant, Chander, 1988. "Endogenous transfer pricing and the effects of uncertain regulation," Journal of International Economics, Elsevier, vol. 24(1-2), pages 147-157, February.
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    9. Horst, Thomas, 1971. "The Theory of the Multinational Firm: Optimal Behavior under Different Tariff and Tax Rates," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1059-1072, Sept.-Oct.
    10. Batra, Raveendra N & Ramachandran, Rama, 1980. "Multinational Firms and the Theory of International Trade and Investment," American Economic Review, American Economic Association, vol. 70(3), pages 278-290, June.
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    12. James R. MARKUSEN, 2021. "Multinationals, Multi-Plant Economies, And The Gains From Trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    13. Kant, Chander, 1988. "Foreign Subsidiary, Transfer Pricing and Tariffs," MPRA Paper 91947, University Library of Munich, Germany.
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    Cited by:

    1. Guttorm Schjelderup, 1999. "Multinationals, Intra-Firm Trade and the Taxation of Foreign-Source Income," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 93-105.

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    More about this item

    Keywords

    Multinational firms; tax differentials; internalisation;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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