The Role of Firm Ownership in Tax Competition

This paper analyzes the role that the ownership structure of companies plays for governments in asymmetric countries' competition for a multinational's subsidiary. I argue that equilibrium tax policies as well as a foreign investor's location decision in policy competition between these countries critically depend on ownership of incumbent industry. It turns out that otherwise disadvantageous locations with high shares of their incumbent production facilities owned by foreigners may be successful in attracting multinationals.