How an accounting relocation became a 26% boom
Ireland’s reported GDP rose by about 26% in 2015, an extraordinary jump that economist Paul Krugman dubbed “leprechaun economics.” The surge did not mean Irish households suddenly had a quarter more income to spend. It reflected how multinational businesses’ global assets and activity are recorded in Ireland’s national accounts.
A key asset was intellectual property: valuable things such as patents, software and designs. When a multinational moved ownership of that property to an Irish-based company, the accounting location of the asset changed. If the company then licensed it to its own operations around the world, payments and related business activity could be recorded as Irish income or output—even when the customers, workers and factories were largely elsewhere. Apple was among the companies associated with the shift.
Why GDP and household prosperity diverged
GDP measures the value of production attributed to a country, not the amount its residents take home. A company’s intellectual property can be worth billions on paper, and the associated accounting changes can sharply raise reported investment, exports or output. But that does not put an equivalent sum into workers’ paychecks or household bank accounts.
The figures were not simply fabricated: they followed national-accounting rules for a globalized economy. The problem was that those rules made Ireland’s headline GDP unusually sensitive to where a few multinationals booked their assets. Ireland later developed a separate measure, modified gross national income, designed to give a clearer picture of income retained by the domestic economy.
The episode’s lasting lesson is practical: in a country hosting many multinationals, a record GDP growth rate can describe a dramatic change in corporate balance sheets more than a sudden change in ordinary people’s lives.
