This paper analyzes the transfer pricing of multinational firms. We propose a simple framework in which intra-firm prices may systematically deviate from arm's length prices for two motives: i) pricing to market, and ii) tax avoidance. Multinational firms may decide not to avoid taxes if the...

Since 2007 China has considerably reduced its external global imbalances. Its bilateral trade surpluses with the EU and the US have persisted because the rise of China’s import demand has mainly benefited its Asian neighbors and the resource rich countries. The rapid growth of China’s...