This paper examines the effects of state corporate income taxes on the location of foreign direct investment, taking into account the state governments' behavior when setting taxes. Ignoring the tax setting behavior of states may bias the estimate of the tax effects on foreign direct investment....

Over the last years, some Latin American Countries have decreased their Corporate Income Tax rates in order to attract Foreign Direct Investment. However, such a policy would have a significant impact only if Foreign Investment's tax elasticity is relatively high. By the same reason, if the...