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

46 Pages Posted: 25 Apr 2011 Last revised: 29 Apr 2011

See all articles by Jed Kolko

Jed Kolko

Public Policy Institute of California

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Marisol Cuellar Mejia

Public Policy Institute of California

Date Written: April 2011

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.

Suggested Citation

Kolko, Jed and Neumark, David and Cuellar Mejia, Marisol, What Do Business Climate Indexes Teach Us About State Policy and Economic Growth? (April 2011). NBER Working Paper No. w16968, Available at SSRN: https://ssrn.com/abstract=1820080

Jed Kolko (Contact Author)

Public Policy Institute of California ( email )

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David Neumark

University of California, Irvine - Department of Economics ( email )

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HOME PAGE: http://www.socsci.uci.edu/~dneumark/

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Marisol Cuellar Mejia

Public Policy Institute of California ( email )

500 Washington Street
Suite 800
San Francisco, CA 94111
United States

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