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International Share Ownership, Profit Shifting and Protectionism

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Abstract

In this paper, I examine the implications of increasing globalisation of stock market ownership on the economics of protection. Current data on European, Japanese and Australian stock exchanges indicate that in most cases over 30 per cent of the stock market is foreign-owned, a large increase on a couple of decades ago. Foreign share ownership in the USA lags behind these levels, but is increasing fast. This degree of foreign share-ownership is likely to change qualitatively the nature of the response of governments to FDI and support for `domestic' firms. In particular, a series worked examples, based upon duopoly theory, suggest that the level of foreign share-ownership is usually sufficient for profit-shifting on its own no longer to justify protection .

Suggested Citation

  • T.Huw Edwards, 2007. "International Share Ownership, Profit Shifting and Protectionism," Discussion Paper Series 2007_28, Department of Economics, Loughborough University, revised Nov 2007.
    • Handle: RePEc:lbo:lbowps:2007_28
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    1. T.Huw Edwards, 2009. "Regulatory Protection When Firms Move First," Discussion Paper Series 2009_19, Department of Economics, Loughborough University, revised Nov 2009.

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    More about this item

    Keywords

    Trade; Oligopoly; Capital Ownership.;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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