Economists Aim For Better Business Climate Rankings

Two Ball State University economists have released a new model to rank state economies. It uses the average score from seven national sources to build what Dick Heupel and Rosemary Kaiser say is "generally more reflective of states’ actual business climates." Indiana ranks third in the inaugural States’ Business Climates Index.

The economists compiled the ranking using information from Chief Executive Magazine, CNBC, Forbes, George Mason University, the Institute for Legal Reform, Pollina Corporate Real Estate and the Tax Foundation.

Heupel says a lack of consistency among the many publications releasing their own rankings prompted the idea. "They all follow different approaches, some measuring economic indicators such as GDP (gross domestic product) and some considering a state’s tax incentives. Taken individually, the rankings can offer very disparate results."

The concept is similar to the Dow Jones industrial average, which creates a valuation for the top 30 U.S. stocks based on aggregating business indicators. Heupel says, by using seven sources, Ball State’s model avoids potential confusion or distortion by a single outlet.

Utah is number one, New Jersey two and Indiana three. New Jersey came in last.

Kaiser says "with the great amount of criticism surrounding the usefulness of state business climate rankings, it was necessary for us to compare each ranking system with state data on output and employment growth. Although there is certainly more to a state’s business climate than observable growth in output and employment, doing this led us to believe that our mean ranking system was generally more reflective of states’ actual business climates than any individual ranking.”