An official website of the United States government
Abstract Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their true economic location in official statistics. We associate the universe of traded securities issued by firms in tax havens with their issuer's ultimate parent and restate bilateral investment positions to better reflect the financial linkages connecting countries around the world. Bilateral portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly $600 billion. Further, we demonstrate how offshore issuance in tax havens affects our understanding of the currency composition of external portfolio liabilities and the nature of foreign direct investment. Finally, we provide additional restatements of bilateral investment positions, including one based on the geographic distribution of sales.
more »
« less
China in Tax Havens
We document the rise of China in offshore capital markets. Chinese firms use global tax havens to access foreign capital in both equity and bond markets. In the last 20 years, China's presence went from raising a negligible amount of capital in these markets to accounting for more than half of equity issuance and around a fifth of global corporate bonds outstanding in tax havens. Using rich micro data, we show that a range of Chinese firms, including both tech giants and state-owned enterprises, use these offshore centers. We conclude by discussing the macroeconomic and financial stability implications of these patterns.
more »
« less
- Award ID(s):
- 1653917
- PAR ID:
- 10489442
- Publisher / Repository:
- AEA Papers and Proceedings
- Date Published:
- Journal Name:
- AEA Papers and Proceedings
- Volume:
- 113
- ISSN:
- 2574-0768
- Page Range / eLocation ID:
- 114-119
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
More Like this
-
-
null (Ed.)This article contributes to debates on the financialization of global South economies by looking closely at how India’s real estate markets became entwined with global financial networks. We offer an analytical frame that centers on the strategies of global finance and its ability to transform its form and mode of operation when faced with a supposed ‘limit’, both spatially and temporally. Finance capital, we argue, derives its power from working with state actors and ambitious borrowers––across borders, sectors and conditions–– to spawn new investment opportunities and, over time, a financialized type of urban transformation. In 2005, India deregulated foreign investment into land and real estate, a watershed moment that radically altered the financial and urban speculative logics of the sector. Private equity firms made vast investments into urban projects, anticipating massive returns, and even though the bubble quickly burst, India continues to attract finance capital. We explain this conundrum by tracking the new techniques and investment tools of private equity (‘following the financial strategy’), arguing for an analytical approach attuned to the relentless dynamism and hyper-mobility of finance capital (an ‘inter-scalar and conjunctural dynamics approach’).more » « less
-
Abstract How important is human capital at the top of the U.S. income distribution? A primary source of top income is private “pass-through” business profit, which can include entrepreneurial labor income for tax reasons. This article asks whether top pass-through profit mostly reflects human capital, defined as all inalienable factors embodied in business owners, rather than financial capital. Tax data linking 11 million firms to their owners show that top pass-through profit accrues to working-age owners of closely held mid-market firms in skill-intensive industries. Pass-through profit falls by three-quarters after owner retirement or premature death. Classifying three-quarters of pass-through profit as human capital income, we find that the typical top earner derives most of her income from human capital, not financial capital. Growth in pass-through profit is explained by both rising productivity and a rising share of value added accruing to owners.more » « less
-
Abstract Global product platforms can reduce production costs through economies of scale and learning but may decrease revenues by restricting the ability to customize for each market. We model the global platforming problem as a Nash equilibrium among oligopolistic competing firms, each maximizing its profit across markets with respect to its pricing, design, and platforming decisions. We develop and compare two methods to identify Nash equilibria: (1) a sequential iterative optimization (SIO) algorithm, in which each firm solves a mixed-integer nonlinear programming problem globally, with firms iterating until convergence; and (2) a mathematical program with equilibrium constraints (MPEC) that solves the Karush Kuhn Tucker conditions for all firms simultaneously. The algorithms’ performance and results are compared in a case study of plug-in hybrid electric vehicles where firms choose optimal battery capacity and whether to platform or differentiate battery capacity across the US and Chinese markets. We examine a variety of scenarios for (1) learning rate and (2) consumer willingness to pay (WTP) for range in each market. For the case of two firms, both approaches find the Nash equilibrium in all scenarios. On average, the SIO approach solves 200 times faster than the MPEC approach, and the MPEC approach is more sensitive to the starting point. Results show that the optimum for each firm is to platform when learning rates are high or the difference between consumer willingness to pay for range in each market is relatively small. Otherwise, the PHEVs are differentiated with low-range for China and high-range for the US.more » « less
-
Abstract Local food systems can have economic and social benefits by providing income for producers and improving community connections. Ongoing global climate change and the acute COVID-19 pandemic crisis have shown the importance of building equity and resilience in local food systems. We interviewed ten stakeholders from organizations and institutions in a U.S. midwestern city exploring views on past, current, and future conditions to address the following two objectives: 1) Assess how local food system equity and resilience were impacted by the COVID-19 pandemic, and 2) Examine how policy and behavior changes could support greater equity and resilience within urban local food systems. We used the Community Capitals Framework to organize interviewees’ responses for qualitative analyses of equity and resilience. Four types of community capital were emphasized by stakeholders: cultural and social, natural, and political capital. Participants stated that the local food system in this city is small; more weaknesses in food access, land access, and governance were described than were strengths in both pre- and post-pandemic conditions. Stakeholder responses also reflected lack of equity and resilience in the local food system, which was most pronounced for cultural and social, natural and political capitals. However, local producers’ resilience during the pandemic, which we categorized as human capital, was a notable strength. An improved future food system could incorporate changes in infrastructure (e.g., food processing), markets (e.g., values-based markets) and cultural values (e.g., valuing local food through connections between local producers and consumers). These insights could inform policy and enhance community initiatives and behavior changes to build more equitable and resilient local food systems in urban areas throughout the U.S. Midwest.more » « less
- Free Publicly Accessible Full Text
-
Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1257/pandp.20231001
