If profits are booked in the wrong country, which national statistics are wrong?
Offshore Profit Shifting and Aggregate Measurement: Balance of Payments, Foreign Investment, Productivity, and the Labor Share
Fatih Guvenen et al. (2022) · American Economic Review
Replication data ↗ (openICPSR)
The archive requires an account we do not hold, so the files were not opened. What follows rests on the published abstract and on this platform's own observations.
What the authors found
Guvenen, Mataloni, Rassier and Ruhl show that profit shifting does not merely move tax revenue — it corrupts headline measures of the US economy. From 1982 to 2016, on average 38 per cent of income attributed to US direct investment abroad is properly attributable to the United States. Correcting for it shrinks the measured trade deficit, lowers the apparent return on US investment abroad, and raises measured productivity growth. The mismeasurement is large enough to change the story macroeconomists tell about the period.
What our data adds
Both sides of one shifting channel are in this database, and reading them together is more revealing than either alone. Luxembourg pays out 13.21 per cent of its GDP in charges for the use of intellectual property — the highest in the world by a wide margin — while receiving comparatively little. Switzerland pays 3.66 per cent and receives 3.36; Singapore pays 3.43 and receives 2.60; Sweden pays 3.42 and receives 1.79. Cyprus is the mirror image, receiving 8.12 per cent of GDP and paying 2.84. These are not research budgets moving. They are the same small set of jurisdictions appearing on both sides of a ledger whose entries are set inside firms.
Absolute receipts. The note's argument rests on these scaled by GDP, where the ranking changes completely.
| Figure | Value | Indicator |
|---|---|---|
| Luxembourg, IP payments as a share of GDP | 13.21% | BM.GSR.ROYL.CD |
| Switzerland, payments / receipts | 3.66% / 3.36% | BM.GSR.ROYL.CD |
| Cyprus, receipts | 8.12% | BX.GSR.ROYL.CD |
| Share of US outward FDI income reattributable to the US (paper) | 38% | BX.GSR.ROYL.CD |
Every figure here is computed from observations in this database and can be charted, downloaded or queried.
What this cannot show
Balance of payments royalty lines cannot separate genuine licensing from intra-group transfer pricing, which is the distinction that decides whether any of this is shifting. The authors reach their 38 per cent using confidential Bureau of Economic Analysis microdata on US multinationals; nothing at this level of aggregation could produce a comparable figure. What our data shows is where the flows concentrate, which is consistent with their account without testing it.
The data behind it
Charges for the use of intellectual property, payments (BoP, current US$)
BM.GSR.ROYL.CD
WBCharges for the use of intellectual property, receipts (BoP, current US$)
BX.GSR.ROYL.CD