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Speaking Falsehoods to Power: States' Misguided Use of 'Cost-of-Doing-Business' Studies in Economic Development Policy

  • Luger, Michael I.

    (U Manchester)

  • Bae, Suho

    (San Francisco State U)

Registered author(s):

    Economic developers at the local and state levels have increasingly used cost-of-doing-business studies to compare their jurisdictions against others. The cost of doing business is enormously difficult to demonstrate in practice because: (1) there are many different types of business costs, many of which are difficult to measure; (2) in making their location choices, businesses take into account more than direct cost differences; and (3) businesses often behave in a dynamic way and either change how they operate to accommodate cost increases or accept some high costs if there are compensating lower costs or benefit payoffs in a particular location. This paper shows that the data and methods used in typical cost-of-doing-business studies are flawed and incomplete and therefore the implications of the studies are misleading.

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    Article provided by Southern Regional Science Association in its journal Review of Regional Studies.

    Volume (Year): 36 (2006)
    Issue (Month): 1 ()
    Pages: 15-43

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    Handle: RePEc:rre:publsh:v:36:y:2006:i:1:p:15-43
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