CES-WP-08-29
Transfer Pricing by U.S.-Based Multinational Firms
Andrew Bernard, J. Bradford Jensen, Peter Schott
September 01, 2008
This paper examines how prices set by multinational firms vary across arm’s-length and
related party customers. Comparing prices within firms, products, destination countries, modes
of transport and month, we find that the prices U.S. exporters set for their arm’s-length
customers are substantially larger than the prices recorded for related-parties. This price wedge
is smaller for commodities than for differentiated goods, is increasing in firm size and firm
export share, and is greater for goods sent to countries with lower corporate tax rates and higher
tariffs. We also find that changes in exchange rates have differential effects on arm’s-length and
related-party prices; an appreciation of the dollar reduces the difference between the prices.
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