Export Pricing of Foreign Firms in Hungary: Estimations for 1992-96

28 Pages Posted: 13 May 2003

See all articles by Laszlo Halpern

Laszlo Halpern

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS); Centre for Economic Policy Research (CEPR); Central European University, Economics Department

Miklós Koren

Princeton University - International Economics Section

Date Written: March 2003

Abstract

The Paper investigates how foreign-owned and domestic firms in Hungary set their export prices. Using a unique dataset with firm and product-level data on trade flows, we find that foreign firms charge substantially lower export prices than domestic firms. This finding is robust after controlling for relevant firm characteristics, indicating that the pricing behaviour of foreign firms is different. One explanation is that multinational firms engage in transfer pricing to minimize tax burden. We provide evidence that tax incentives explain a large portion of the price gap; the export prices of tax-paying foreign firms are 15 to 35% lower than arm's length prices.

Keywords: Transfer pricing, export pricing, foreign firms

JEL Classification: D21, F23, F41, L13

Suggested Citation

Halpern, László and Koren, Miklós, Export Pricing of Foreign Firms in Hungary: Estimations for 1992-96 (March 2003). Available at SSRN: https://ssrn.com/abstract=407141

László Halpern (Contact Author)

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS) ( email )

Toth K str 4
Budapest, 1097
Hungary

HOME PAGE: http://econ.core.hu/~halpern

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Central European University, Economics Department ( email )

Nador utca 9
Budapest, 1051
Hungary

Miklós Koren

Princeton University - International Economics Section ( email )

Fisher Hall 305
http://miklos.koren.hu/research/
Princeton, NJ 08544
United States

HOME PAGE: http://miklos.koren.hu/research/