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What Do Business Climate Indexes Teach Us About State Policy and Economic Growth?

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  • Jed Kolko
  • David Neumark
  • Marisol Cuellar Mejia

Abstract

State business climate indexes capture state policies that might affect economic growth. State rankings in these indexes vary wildly, raising questions about what the indexes measure and which policies are important for growth. Indexes focused on productivity do not predict economic growth, while indexes emphasizing taxes and costs predict growth of employment, wages, and output. Analysis of sub-indexes of the tax-and-cost-related indexes point to two policy factors associated with faster growth: less spending on welfare and transfer payments; and more uniform and simpler corporate tax structures. But factors beyond the control of policy have a stronger relationship with economic growth.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16968.

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Date of creation: Apr 2011
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Publication status: published as Jed Kolko & David Neumark & Marisol Cuellar Mejia, 2013. "What Do Business Climate Indexes Teach Us About State Policy And Economic Growth?," Journal of Regional Science, Wiley Blackwell, vol. 53(2), pages 220-255, 05.
Handle: RePEc:nbr:nberwo:16968

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Economically Free States see 30 Percent Faster Job Growth
    by Matt Mitchell in Neighborhood Effects on 2011-05-12 18:26:11
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Cited by:
  1. Kurt Mitman & Iourii Manovskii & Fatih Karahan & Marcus Hagedorn, 2013. "Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects," 2013 Meeting Papers 1260, Society for Economic Dynamics.
  2. David Neumark & Jennifer Muz, 2014. "The “Business Climate” and Economic Inequality," NBER Working Papers 20260, National Bureau of Economic Research, Inc.
  3. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.
  4. Anderson, John E., 2012. "State Tax Rankings: What Do They And Don’T They Tell Us?," National Tax Journal, National Tax Association, vol. 65(4), pages 985-1010, December.

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