The Economic Outlook ranking purports to predict state level economic growth. From the latest edition:
The Economic Outlook Ranking is a forecast based on a state’s current standing in 15 state policy variables. Each of these factors is influenced directly by state lawmakers through the legislative process. Generally speaking, states that spend less—especially on income transfer programs—and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.
However, the ranking has essentially no predictive power for subsequent growth, as measured by employment (dlempl) or real GDP (dlrgdp). This is shown in the table. The variable rsps is the ranking provided by Rich States, Poor States, with lower values indicating a purportedly better business environment.
ldensity Log population density
wet Precipitation (less precipitation = higher values)
mild Temperature extremes (less extreme = higher values)
distance Proximity to water (closer = higher values)
These variables are from Kolko et al. (2013), as provided by Professor Neumark.
Notice that the RSPS rank is not significant, regardless of specification.
One might argue that the impact should be assessed over a longer horizon; however, using a 3 year horizon, neither employment and GDP growth exhibit a robust relationship with the Rich States, Poor States ranking.