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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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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. In Praise of David Neumark
      by Adam Ozimek in Modeled Behavior on 2015-07-30 05:07:00

    Citations

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    Cited by:

    1. Neumark, David & Simpson, Helen, 2015. "Place-Based Policies," Handbook of Regional and Urban Economics, Elsevier.
    2. Hagedorn, Marcus & Karahan, Fatih & Manovskii, Iourii & Mitman, Kurt, 2013. "Unemployment benefits and unemployment in the Great Recession: the role of macro effects," Staff Reports 646, Federal Reserve Bank of New York, revised 01 Feb 2015.
    3. Anderson, John E., 2012. "State Tax Rankings: What Do They and Don’t They Tell Us?," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(4), pages 985-1010, December.
    4. Rigoberto Lopez & Nataliya Plesha & Ben Campbell, 2014. "Economic Impacts of Agriculture in Eight Northeastern States," Zwick Center Research Reports 02, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. Cameron A. Shelton & Nathan Falk, 2016. "Policy Uncertainty and Manufacturing Investment: Evidence from U.S. State Elections," CESifo Working Paper Series 5846, CESifo Group Munich.
    6. repec:bap:journl:170407 is not listed on IDEAS
    7. Stefan Fölster & Li Jansson & Anton Nyrenström Gidehag, 2016. "The effect of local business climate on employment," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing, vol. 5(1), pages 2-24, April.
    8. David Neumark & Jennifer Muz, 2016. "The “Business Climate” and Economic Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(1), pages 161-180, March.
    9. Florencia Garcia-Vicente & Daniel Garcia-Swartz & Martin Campbell-Kelly, 2017. "Information technology clusters and regional growth in America, 1970–1980," Small Business Economics, Springer, vol. 48(4), pages 1021-1046, April.
    10. Devin Bunten & Stephan Weiler & Eric Thompson & Sammy Zahran, 2015. "Entrepreneurship, Information, And Growth," Journal of Regional Science, Wiley Blackwell, vol. 55(4), pages 560-584, September.

    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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