Recently, a growing number of articles in the media have noted U.S. corporations announcing that they intend to move their headquarters overseas. This practice is known as a corporate inversion, which occurs when a U.S. corporation that is currently the ultimate owner of its worldwide operations takes steps to become a wholly owned subsidiary of a foreign corporation.
The Bureau of Economic Analysis (BEA) has published a BEA Briefing in the Survey of Current Business that discusses how corporate inversions can affect major aggregates in the international and national economic accounts, including an estimate of the size of the impact of inversions on related BEA statistics.
Below are some highlights from the Briefing. For the full analysis and to view the impact of inversions on activities of multinational enterprises (AMNE) statistics see the BEA Briefing.
International Statistics
- The foreign direct investment position in the United States—which comprises the direct investors’ equity in, and net outstanding loans to, their U.S. affiliates—generally increases after an inversion because the inverting U.S. corporation becomes an asset of a foreign investor.
- The measures of multinational enterprise activities—which include data items such as employment, capital expenditures, value added, and research and development (R&D) expenditures—also generally increase as a result of inversions.
- Corporate inversions may also affect BEA’s U.S. direct investment abroad, or outward direct investment, statistics if the U.S. multinational enterprise transfers the ownership of some or all of its foreign affiliates to its new foreign owner.
National Statistics
- Corporate inversions would generally reduce gross national income, that is, income resulting from the current production of goods and services by U.S.-owned labor and capital.
- Corporate profits, the portion of the total gross national income earned from current production that is accounted for by U.S. corporations, would also generally be reduced by inversions.
Gross domestic income, which is income resulting from the current production of goods and services in the domestic economy, would not be affected by inversions.