Business Climate, Taxes and Expenditures, and State Industrial Growth in the United States

Many state and local public officials and businessmen have placed increasing emphasis on a state's so-called as a central factor in determining its ability to attract industry and promote growth. Exactly what constitutes a good business climate is not entirely clear but it is usually associated with low state and local taxes, right to work laws, little union activity, and a cooperative governmental structure. In the newly emergent Sunbelt/ Frostbelt controversy, the relatively good business climate of the southern states is frequently offered as a major explanation of Sunbelt growth. The ambiguous nature of the term has no doubt discouraged serious statistical inquiry into its possible effect on industrial location decisions and industrial growth. Like many poorly defined concepts, business climate has become both an all-encompassing term which includes a multitude of (frequently unquantifiable) factors alleged to be important in location decisions as well as a term which takes on different meanings depending upon whether the user is a corporate executive, location consultant, public official, or academic. Recent reports by industrial consulting firms 15; 6 have further fueled the controversy by ranking states according to variously defined business climate scores.'