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

  • Jed Kolko
  • David Neumark
  • Marisol Cuellar Mejia

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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File URL: http://www.nber.org/papers/w16968.pdf
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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
Note: EFG LS PE
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