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State business indicators

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Periodically new economic indicators or indexes are released for the states. Often North Carolina does well on these measures. But are these indicators useful?  Do they tell us anything? N.C. State University economist Mike Walden answers.

“Well, they can … . But like anything. you have to really go behind the indicator. You have to see what they’re measuring. And the factors that these various indicators measure are varied. Some focus on taxes. Some focus on regulations, business, labor costs, et cetera. So you have to really ask what are they measuring.

“Secondly you have to be concerned about how those various measures in the indicator are combined. Is it simply a simple average, or is it a weighted average? How are those weights combined and formed?

“And also the research that’s been done in this show there’s no necessary correlation between any specific business indicator and economic growth in the state. What the research has seemed to indicate … is that if you look at all the different indices, those that focus most on taxes and business costs do appear to be most closely related to economic growth in a state.”

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