Replication data for: Jobs and Fiction: Identifying the Effect of Corporate Tax Avoidance Inflating Export Measures in Ireland
Description
Ireland’s emergence as a European hub for multinationals in the information and communication technology (ICT) and pharmaceutical industries highlighted the growing tension between spatially dispersed, globalized economic activity and the nation-centered measures used to monitor it. Although ‘big tech’ and ‘big pharma’ are often praised as export powerhouses, their real contribution to Irish economic performance is unclear, as corporate tax avoidance artificially inflates national statistics. By moving around intellectual property assets, inverting corporate headquarters or engaging in factoryless manufacturing, firms go out of their way to book their profits in low-tax jurisdictions. Their products and services show up as Irish exports, often without employing any Irish labor or capital in the production process. This article uses a novel empirical approach to distinguish job-sustaining economic activity from accounting fiction. By contrasting traditional measures of export growth with export sector employment and earnings, it identifies sectors with sudden, unexplained discrepancies between the two, that are indicative signs for fictitious activity. Supporting the hypothesized pattern, discrepancies cluster in ICT and pharmaceutical industries, that are dominated by multinationals from the United States. The investigation also finds that controlling for distortions, external demand and the Transatlantic trade link remain key drivers of Irish growth. But the paper’s findings should caution analysts to extrapolate from the success of ‘big tech’ and ‘big pharma’ to national economic performance ‒ a lesson particularly relevant in the light of the COVID-19 shock, which left these specific industries largely unscathed.