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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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Suggested Citation

  • 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, May.
  • Handle: RePEc:bla:jregsc:v:53:y:2013:i:2:p:220-255
    DOI: j.1467-9787.2012.00782.x
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    File URL: http://hdl.handle.net/10.1111/j.1467-9787.2012.00782.x
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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 23:26:11
    2. In Praise of David Neumark
      by Adam Ozimek in Modeled Behavior on 2015-07-30 05:07:00

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    2. Lopez, Rigoberto A. & Plesha, Nataliya & Campbell, Benjamin, 2014. "Economic Impacts of Agriculture in Eight Northeastern States," Research Reports 290064, University of Connecticut, Charles J. Zwick Center for Food and Resource Policy.
    3. Neumark, David & Simpson, Helen, 2015. "Place-Based Policies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1197-1287, Elsevier.
    4. Susan Feng Lu & Lauren Xiaoyuan Lu, 2017. "Do Mandatory Overtime Laws Improve Quality? Staffing Decisions and Operational Flexibility of Nursing Homes," Management Science, INFORMS, vol. 63(11), pages 3566-3585, November.
    5. G. Jason Jolley & Mandee Foushee Lancaster & Jiang Gao, 2015. "Tax Incentives and Business Climate," Economic Development Quarterly, , vol. 29(2), pages 180-186, May.
    6. Marcus Hagedorn & Fatih Karahan & Iourii Manovskii & Kurt Mitman, 2013. "Unemployment Benefits and Unemployment in the Great Recession: The Role of Equilibrium Effects," Staff Reports 646, Federal Reserve Bank of New York.
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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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