State policymakers strive to improve their business climates, and social scientists are interested in exploring both the causes and consequences of this action. However, the notion of a “business climate” is poorly conceptualized and crudely measured, and this has hindered progress in this area. We propose a multidimensional measure derived from a weakly confirmatory factor analysis, and show how this measure illuminates substantive differences among economic development policies—differences that are obscured by conventional measures of policy activity. We illustrate the validity of our measure by tracking its movement in relation to the evolution of development strategy in Indiana, a state known for its aggressive efforts to stimulate growth. We then demonstrate the utility of our measure in quantitative analyses of the determinants of development policies, and their impact on state economies.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Urban Studies