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Business Climate, Taxes, and Economic Development

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  • Paul D. Warner

    (Mississippi Research and Development Center)

Abstract

This article reviews the treatment given to state and local fiscal policy by modern business climate studies and contrasts it with research findings. Empirical evidence on the impact of tax differentials on economic growth has undergone major changes in recent years. Tax rates, when observed in isolation, are now widely believed to have a negative impact on state and local economic growth. This shift in consensus lends support to the major business climate studies that assign a prominent role to taxes. Unfortunately, most current business climate studies are too simplistic to provide a useful guide for economic development policy. In particular, the tax variables used in the studies are overly aggregative and government expenditures are virtually ignored. By contrast, recent empirical research that examines both sides of the budget and utilizes econometric analysis provides information that has the potential to enhance the efficiency and flexibility of economic development strategy.

Suggested Citation

  • Paul D. Warner, 1987. "Business Climate, Taxes, and Economic Development," Economic Development Quarterly, , vol. 1(4), pages 383-390, November.
    • Handle: RePEc:sae:ecdequ:v:1:y:1987:i:4:p:383-390
    DOI: 10.1177/089124248700100409
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    Cited by:

    1. Linda McCarthy, 2015. "Something New or More of the Same in the Bidding Wars for Big Business?," Growth and Change, Wiley Blackwell, vol. 46(2), pages 153-171, June.
    2. L A Reese, 1992. "Explaining the Extent of Local Economic Development Activity: Evidence from Canadian Cities," Environment and Planning C, , vol. 10(1), pages 105-120, March.
    3. Mikhail Ivonchyk, 2022. "Local Economic Development Policies and Business Activity: Dynamic Panel Data Analysis of All County Governments in the State of Georgia," Economic Development Quarterly, , vol. 36(2), pages 92-107, May.
    4. Laura A. Reese & David Fasenfest, 1997. "What Works Best?: Values and the Evaluation of Local Economic Development Policy," Economic Development Quarterly, , vol. 11(3), pages 195-207, August.
    5. Carol Taylor West, 1993. "The Problem of Unemployment in the United States: A Survey of 60 Years of National and State Policy Initiatives," International Regional Science Review, , vol. 16(1-2), pages 17-47, April.
    6. David L. Barkley, 1996. "Turmoil in traditional industry: prospects for nonmetropolitan manufacturing," Monograph, Federal Reserve Bank of Kansas City, number 1996titpfn, March.
    7. Gary Sands & Laura A. Reese & Heather L. Khan, 2006. "Implementing Tax Abatements in Michigan: A Study of Best Practices," Economic Development Quarterly, , vol. 20(1), pages 44-58, February.

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