The "Business Climate" and Economic Inequality

David Neumark and Jennifer Muz

No 20260, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: "Business climate indexes" characterize state economic policies, and are often used to try to influence economic policy debate. However, they are also useful in research as summaries of a large number of state policies that cannot be studied simultaneously. Prior research found that business climate indexes focused on productivity and quality of life do not predict economic growth, while indexes emphasizing taxes and costs of doing business indicate that low-tax, low-cost states have faster growth of employment, wages, and output. In this paper, we study the relationship between these two categories of business climate indexes and the promotion of equality or inequality. We do not find that the productivity/quality-of-life indexes predict more equitable outcomes, although some of the policies underlying them suggest they might. We do find, however, that the same tax-and-cost related indexes that are associated with higher economic growth are also associated with increases in inequality.

JEL-codes: H71 J38 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-env, nep-gro, nep-lma, nep-ltv and nep-pbe
Note: EFG LS PE
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Published as David Neumark & Jennifer Muz, 2016. "The “Business Climate” and Economic Inequality," Review of Income and Wealth, vol 62(1), pages 161-180.

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Journal Article: The “Business Climate” and Economic Inequality (2016)
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