State government effects on the spatial distribution of inward foreign direct investment

In a recent review of the literature, Wasylenko (1981) concluded that taxes have very little effect on interregional business location decisions. The present study examines the impact of state taxes and incentive programs on the spatial distribution of inward foreign direct investment in manufacturing. The results reveal that taxes, which were measured in various ways, deter foreign direct investment. Conversely, states providing tax incentives, financial assistance, and employment assistance tended to have larger numbers of foreign direct investments.