Rose Institute research assistant Katya Abazajian ’14 used the Kosmont Cost of Doing Business rating compiled by the Rose Institute of State and Local Government as the starting point for her senior thesis. Katya used the data to examine the effects of tax policy on growth. She worked under guidance of Professor Cameron Shelton of the Robert Day School of Economics and Finance. Katya graduates this month with a BA in economics and mathematics.
Local government policy often relies on taxation to address the central concern of ensuring municipal growth. The goal of Katya’s paper was to use the spatial equilibrium model to estimate the correlation between the cost of doing business and certain basic observable outcomes. These outcomes are reflected in wage, population, and price levels. The underlying spatial equilibrium model leads to “deep effects” equations, which are used to connect these observable correlations to more tangible measures of growth. Through the deep effects equations, Katya analyzed the effect of the cost of doing business on the productivity, amenities, and economic success of California’s cities. She found that a higher cost of doing business does not lead to lower productivity and amenities, but rather improves amenities and maintains steady levels of productivity under a long-term equilibrium.
Follow this link to read the entire paper.