What can states do to improve economic growth?

Date posted: August 20, 2012

Most states, including North Carolina, want to create more jobs and lower their unemployment rates. N.C. State University economist Mike Walden takes a look at what can they do to accomplish these goals.

“Well …, in the short run the options are really limited because economists who have looked at economic growth among states say that most of the reason for differences in economic growth have to do with things directly beyond the control of elected leaders — things like what industries are in a state, population characteristics, even the weather. And these are things that are very, very hard — if not impossible — to change, particularly in the short run.

“Obviously two areas where elected officials do have some impact are on taxes and spending. Here the research seems to indicate that in terms of taxes, states that have a simpler tax system, especially for businesses; a system that raises revenue, but raises it in a very straightforward way that everyone understands — those states tend to have better economic growth rates.

“And on the spending side, states that are able to spend more of their money on making their individuals in their state — their workers — more productive in terms of better skills and training, those states also tend to have over the long run better rates of economic growth.”

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