In this paper, we model the tax setting game between two revenue maximizing countries which compete for the location of a single production plant owned by a multinational firm. We introduce the possibility that the multinational can shift a fraction of its profits out of the country where the...

This paper investigates the role of corporate taxation with respect to a multinational's investment decision, in which the multinational can pursue either a direct or an indirect investment strategy. The latter involves at least three corporate entities and opens up enhanced opportunities for...

Using a large international firm-level data set, we estimate separate effects of host and parent country taxation on the location decisions of multinational firms. Both types of taxation are estimated to have a negative impact on the location of new foreign subsidiaries. In fact, the impact of...

Most existing empirical evidence on the impact of profit taxation on multinational firm activity is based on cross-country data. One major drawback of such data is that countries differ not only with regard to taxes but along other dimensions which might be hard to capture by means of observable...

Despite the continuing political interest in the usefulness of tax competition and tax coordination as well as the wealth of theoretical analyses, it still remains open whether or when tax competition is harmful. Moreover, the influence of tax differentials on multinationals' decisions is still...

The objective of this paper is to empirically assess the recently introduced models of subsidy competition based on the classical oligopoly theories, using both cross-sectional and panel data. Three crucial scenarios (including coordination, weak competition, and fierce competition) are tested...

This paper provides a theory and firm-level evidence on the incorporation decision of entrepreneurs in a model of taxes and corporate governance. The theory explains how the incorporation decision of entrepreneurs is driven by taxation (corporate and personal income taxes), corporate...

This paper reviews the recent literature on the relocation of headquarters (HQs). Overall results show that full and direct international relocations of corporate HQs are rare events. However, there is a trend that MNEs increasingly unbundle their HQs so as to spread their different HQs...

This paper analyses tax competition and tax coordination in a model where capital flows occur in the form of mergers and acquisitions, rather than greenfield investment. In this framework, we show that differences in residence based taxes do not necessarily distort international ownership...

We address the role of labor cost differentials for national tax policies. Using a simple theoretical framework with two countries competing for a mobile firm, we show that in a bidding race for FDI, it is optimal for governments to compensate firms for international labor cost differentials....