Barriers to Mobility: The Lockout Effect of U.S. Taxation of Worldwide Corporate Profits

Written by: John R. Graham, Michelle Hanlon and Terry Shevlin I. INTRODUCTION In a frictionless world, capital would flow freely across countries. Within multinational firms, capital would be allocated across divisions, regardless of the location of those divisions, to maximize marginal product and firm value. In reality, tax laws create barriers to capital mobility. Taxes also create incentives for firms to expend resources in an effort to avoid or minimize…
D. Richard Mead Jr. Family Professor of Finance, Fuqua School of Business, Duke University, USA
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