Choice of jurisdictions and markets by multinationals: a formalized approach

Abstract

This paper studies correlation between tax levels and the choice of a multinational producer where to locate its headquarters and whether to serve the overseas market either through exports or via foreign direct investment. For testing a model of the University of Munich’s scientific group with a two-jurisdiction tax competition environment is taken. Thereby it is shown that solution is not to be assigned within Nash equilibrium even if the jurisdictions are fully identical.