Income Shifting Incentives and Offshored U.S. Jobs

Abstract

This paper examines if, when, and to what extent international income shifting incentives explain where multinational firms move offshored U.S. jobs. Using a small, detailed sample of offshored jobs from a program within the Department of Labor called Trade Adjustment Assistance (TAA), I find that tax incentives have a material impact on where firms move offshored U.S. jobs. However, across certain sourcing arrangements, types of firms, and types of jobs, the results indicate that tax incentives have little or no association with where offshored U.S. jobs are moved, suggesting that there is significant cross-sectional variation in the degree to which tax incentives distort labor offshoring decisions. These findings are relevant to those seeking to understand the real effects and welfare consequences of incentives created by current U.S. international tax policy.