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Subsidy competition and the role of firm ownership

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  • Ferdinand Mittermaier

Abstract

This paper addresses the role that foreign vs. domestic ownership of companies plays for governments in asymmetric countries’ competition for a multinational’s subsidiary. I argue that equilibrium subsidies as well as a foreign investor’s location decision in policy competition between these countries critically depend on the ownership structure of incumbent firms. This shows that small countries with few national incumbents in an industry may be successful in attracting multinationals.

Suggested Citation

  • Ferdinand Mittermaier, 2007. "Subsidy competition and the role of firm ownership," Working Papers 032, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:032_mittermaier
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    File URL: http://www.bgpe.de/texte/DP/032_mittermayer.pdf
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    References listed on IDEAS

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    4. Ben Ferrett & Ian Wooton, 2010. "Competing for a duopoly: international trade and tax competition," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 776-794, August.
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    7. Ignatius J. Horstmann & James R. Markusen, 2021. "Endogenous market structures in international trade (natura facit saltum)," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 2, pages 25-45, World Scientific Publishing Co. Pte. Ltd..
    8. Bjorvatn, Kjetil & Eckel, Carsten, 2006. "Policy competition for foreign direct investment between asymmetric countries," European Economic Review, Elsevier, vol. 50(7), pages 1891-1907, October.
    9. Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
    10. Sebastian Kessing & Kai Konrad & Christos Kotsogiannis, 2009. "Federalism, weak institutions and the competition for foreign direct investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(1), pages 105-123, February.
    11. Fuest, Clemens, 2005. "Economic integration and tax policy with endogenous foreign firm ownership," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1823-1840, September.
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    More about this item

    Keywords

    Subsidy competition; foreign direct investment; regional location;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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