State governments finance their expenditures with multiple tax instruments, so when collections from one source decline, they are typically compensated by greater revenues from other sources. This paper addresses the important question of the extent to which personal and corporate income taxes...

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....