Working Papers
Working Papers
The Global Allocation of Extractive Windfalls, with Ninon Moreau-Kastler
Coverage: New York Times, Le Monde, Editorial in Le Monde, Tax Notes, Ouest France, Le Soir, Marianne, L'Humanité, L'Express, La Croix, IGC Tax Talks, IGC Policy Brief
The extraction of oil, gas, and minerals generates large economic rents, yet it remains unknown how commodity price windfalls are distributed across the global networks of multinational enterprises (MNEs) that dominate production in most resource-rich countries. We study this question by combining administrative records covering the worldwide profits, revenues, and employees of large MNEs across all jurisdictions, with comprehensive data on their physical extraction activity at the affiliate level. Extractive MNEs have a substantial presence in countries in which they do not extract: downstream and consumption countries, as well as low-tax jurisdictions. Combining differences in firms' commodity specialization with heterogeneous market price changes in a shift-share design, we find that windfall profits are partly diverted to low-tax jurisdictions. For every additional dollar of consolidated windfall profit, $0.8 accrues to extractive affiliates, $0.2 to tax havens, and nothing to the rest of the group. This diversion intensifies during booms: the share of profits booked in tax havens rises by one percentage point for every 10% increase in group profitability.
Hotelling Meets Laffer - Taxation and the Discovery of Exhaustible Resources
Resource-rich countries have raised mining taxes over the past two decades to capture a growing mining rent, betting that location-specific reserves and sunk capital allow governments to capture rents without distorting production. Using a global firm-level panel of mining exploration and production from 1997 to 2024, combined with a newly compiled dataset of statutory tax rates, I find that higher taxes leave production from existing mines unchanged but sharply reduce exploration: a one-percentage-point increase in sales royalties lowers exploration expenditures by 5 to 7 percent, with no significant effect on short-run output. Event studies around the four largest mining tax reforms of the past two decades - South Africa (2010), Ghana (2012), Mexico (2014), and the DRC (2018) - confirm this result. Affected firms gradually relocate exploration abroad, leaving global exploration unchanged in the long run. These findings document a time-inconsistency problem in resource taxation: governments can capture short-run rents from immobile production but erode their long-run tax base by deterring discovery. Quantifying this trade-off, I find that mature mining countries can sustain substantially higher tax rates than frontier countries, where exploration is still defining future production.
Shift or Share? Profit Shifting and Workers' Profit-Sharing, with Manon François, Laure Heidmann, and Giulia Aliprandi
Coverage: VoxTalks, Agence France Presse, Ouest France, RTL Luxembourg, Challenges
This paper quantifies how profit shifting erodes workers' earnings by reducing profit-sharing payouts in French multinational firms. We leverage newly available administrative microdata on the global activity of multinational firms linked to employer-employee data to build a credible counterfactual of profits and profit-sharing absent profit shifting. We estimate that large French multinationals shift 19% of their foreign profits annually to low-tax jurisdictions, resulting in €10.3 billion shifted out of France and €3.7 billion in lost tax revenues. We show that profit shifting reduces annual employees' earnings by 2.6%. Low-income workers are disproportionately affected. The bottom 10% of workers lose 3.2% of wages, compared to 2.3% for top 10% earners. Changing the profit-sharing formula to account for global profitability, rather than subsidiary-level profitability, would increase wages by 4.1% for workers in profit-shifting subsidiaries.