Ball State University in Indiana has created a new business-climate ranking system called the States’ Business Climates Index, in which Illinois ranked 46th out of 50.
The index, published last month, was authored by Dick Heupel, director of the Center for Community Economic Development and interim co-director of the Indiana Communities Institute at Ball State University, and Rosemary Kaiser, student research assistant for the Center for Community Economic Development, who built the ranking system to create a better ranking system for state business climates by amassing information from several top sources.
Sources include the U.S. Chamber Institute for Legal Reform's "State Liability Rankings" study, Chief Executive magazine, CNBC, Forbes magazine, George Mason University, the Institute for Legal Reform and the Pollina Corporate Real Estate and Tax Foundation.
“State rankings have often been criticized for their lack of consistency and relevance to actual economic outcomes, such as employment growth,” the report said. “In order to provide a more reliable state business climate ranking, we create a mean ranking system that combines the rankings from our seven different sources. The relation of our mean ranking system with state output and employment is then tested and compared to that of the individual rankings that it utilizes.”
From an economist’s standpoint, state business-climate rankings generally have been problematic because they tend to provide little to no explanation on the influence of variables considered related to a state having a strong business climate, which mainly include growth in state GDP (gross domestic product), growth in employment and growth in per-capita income, the report said.
Ball State’s new concept mirrors the Dow Jones 30 Industrials stock market index, which evaluates the top 30 U.S. company stocks based on aggregating business indicators. By using the seven sources, Ball State's model escapes potential confusion or distortion by a sole outlet.
Utah topped the list, followed by North Carolina, then Indiana. Tennessee rounded out the top 10, and New Jersey came in last place.
“Although our mean ranking system is not the one tied most directly with growth in state output and employment, we have seen that in this regard, desirable results can be obtained by combining ranking systems to yield a new ranking comprised of more data,” the report said.
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