NE: Competitive or not?
2013 NEBRASKA POLICY AND ISSUES SUMMIT
NEBRASKA CHAMBER OF COMMERCE
NOVEMBER 18, 2013
JONATHAN HAUGHTON
SENIOR ECONOMIST, BEACON HILL INSTITUTE
PROFESSOR, DEPARTMENT OF ECONOMICS, SUFFOLK UNIVERSITY
JHAUGHTON@SUFFOLK.EDU
State Competitiveness, November 2013
The Ratings Cacophony
2
State Competitiveness, November 2013
Key ideas
3
 NE GDP weathered the recession about as well as the US

Because fundamentals of competitiveness are solid?
 Competitiveness: Our measure is



Broad
Associated with per capita income
Helpful in identifying policy-relevant areas of strength, weakness
 NE: Knocking at the top 10


Some others are improving
Several problems need attention
State Competitiveness, November 2013
Personal Income per capita
4
State Competitiveness, November 2013
NE: Muted recession damage
5
State Competitiveness, November 2013
Competitiveness Is …
6
 A state is competitive if it has in place the policies and conditions that
ensure and sustain a high level of per capita income and its continued
growth.

Naturally leads to the question of what these policies and conditions are
 Michael Porter:

Competitiveness measures “the microfoundations of prosperity” and “wealth
is actually created at the microeconomic level.”
 The BHI index:


Inspired by Porter but developed in-house
Long-term: what makes a persistent difference to real income?
 Policy is important, but only part of the story

Natural resources; culture; history.
State Competitiveness, November 2013
The Big Picture: Top 5 + Neighbors
7
MASSACHUSETTS
1 (7.77)
COLORADO
6 (6.36)
NORTH DAKOTA
2 (6.99)
KANSAS
10 (5.77)
MINNESOTA
3 (6.81)
NEBRASKA
11 (5.75)
SOUTH DAKOTA
4 (6.48)
IOWA
13 (5.55)
UTAH
5 (6.42)
MISSOURI
32 (4.64)
NE: Index was 5.97 in 2011 and 6.36 in 2010.
State Competitiveness, November 2013
8
State Competitiveness, November 2013
NE: The trend
9
 Ranks:
 2005
 2006
 2007
 2008
 2009
 2010
 2011
 2012
7
11
11
14
17
6
6
11
8th over the whole period
State Competitiveness, November 2013
NE: The subindexes
10
NE index
NE rank
Government and fiscal policy
5.17
23
Security
5.56
18
Infrastructure
5.64
16
Human resources
5.94
7
Technology
5.00
25
Business incubation
4.84
28
Openness
4.26
40
Environment
5.97
11
Overall
5.75
11
State Competitiveness, November 2013
NE: Government and fiscal policy
11
NE index
State & Local taxes/income
4.81
Workers Comp. premia
5.43
Bond rating
5.43
Budget surplus / GSP
5.28
Avg. pmt to insured unemployed
5.64
FTE St. & Loc. Employees/cap
3.82
Overall
5.17
State Competitiveness, November 2013
NE: Infrastructure
12
NE index
Mobile phones/1000
4.07
Hi-speed Internet lines/1000
4.46
Air passengers per cap
4.56
Avg. travel time to work
6.58
Electricity prices/kWh
5.71
Apartment rental (2 bdrm)
5.90
Overall
5.64
State Competitiveness, November 2013
NE: Business Incubation
13
NE index
Bank deposits/cap
4.84
Venture capital ($/worker)
4.56
Employer firm births/cap
4.89
IPO volume, $/capita
4.53
% of labor force in unions
5.40
Minimum wage
5.19
Tort Reform
4.62
Standardized wage rate
5.48
Overall
4.84
State Competitiveness, November 2013
NE: Openness (weak spot)
14
NE index
Exports/capita
5.01
Employment in foreign MNEs
3.97
% foreign-born
4.60
Overall
4.26
State Competitiveness, November 2013
Subindex
1: Government & Fiscal Policy
15
 Colorado
 Iowa
 Kansas
 Missouri
 Nebraska
 Massachusetts
 Mississippi
NE Strengths
Budget surplus % GDP
22
27
35
4
23
33
13
4
NE Weaknesses
Govt. employees/residents 46
State Competitiveness, November 2013
Subindex
2. Security
16
 Colorado
 Iowa
 Kansas
 Missouri
 Nebraska
 Massachusetts
NE Strength
BGA integrity index
6
 Mississippi
4
15
23
37
18
3
45
State Competitiveness, November 2013
Subindex
3: Infrastructure
17





NE Strengths
Travel time to work
Apartment rental cost
Electricity prices
3
8
9
Colorado
Iowa
Kansas
Missouri
Nebraska
 Massachusetts
 Mississippi
4
29
7
13
16
33
41
NE Weaknesses
Mobile phones/capita
High-speed lines/capita
41
34
State Competitiveness, November 2013
Subindex
4: Human Resources
18
 Colorado
 Iowa
 Kansas
 Missouri
 Nebraska
15
4
16
28
7
NE Strengths
Unemployment rate
% adults in labor force
2
2
NE Weaknesses
Physicians/residents
 Massachusetts
 Mississippi
1
50
35
State Competitiveness, November 2013
Subindex
5: Technology
19
 Colorado
 Iowa
 Kansas
 Missouri
 Nebraska
 Massachusetts
 Mississippi
NE Strengths
S&E graduates/capita
7
19
26
27
25
1
45
10
NE Weaknesses
Patents/capita
High-tech employment
39
33
State Competitiveness, November 2013
Subindex
6: Finance/Business
20
 Colorado
 Iowa
 Kansas
 Missouri
 Nebraska
NE Strengths
Minimum wage
5
 Mississippi
NE Weaknesses
Venture capital/capita
Tort index
 Massachusetts
18
30
20
39
28
12
24
39
33
State Competitiveness, November 2013
Subindex
7: Openness
21
 Colorado
 Iowa
 Kansas
 Missouri
 Nebraska
NE Weaknesses
Employment in foreign MNCs
42
 Massachusetts
 Mississippi
39
38
27
43
40
8
45
State Competitiveness, November 2013
Subindex
8: Environment
22
 Colorado
 Iowa
 Kansas
 Missouri
 Nebraska
 Massachusetts
NE Strength
Carbon emissions/square mile
9
 Mississippi
19
24
12
33
11
28
23
State Competitiveness, November 2013
NE: Long-Term Issues (in bottom 15)
23
 S1 (Government/Taxes)

High number of govt. employees (46)
 S2 (Security)

Jump in crime (36)
 S3 (Infrastructure)

Few mobile phones/cap (41)
 S5 (Technology)

Patents/capita (39)
 S6 (Business Incubation)

Venture capital/capita (39)
 S7 (Openness)

Low employment in foreign MNCs (42)
State Competitiveness, November 2013
Index up 1 point, PCI up $1,893
24
45000
40000
35000
Real Personal Income per capita, $'000
R2 = 0.23
PI per capita deflated using a
spatial pNEce index (Aten et al. 2011)
50000
Real personal income per capita
= 30,873 + 1,893 × Competitiveness Index 2011
p=0.01
3
4
5
6
Competitiveness Index 2011
7
State Competitiveness, November 2013
Applied to NE
25
 Ranked 11th with index of 5.75
Business: 28th (4.84)
 Openness: 40th (4.26)

 Raise these to the mean (5.0):
 Rank would rise to 9th with index of 6.02
 Real personal income would rise $500 per person per year

That’s a total of $900 million annually.
State Competitiveness, November 2013
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Suffolk University was founded in 1906, and has over
9,000 students in its College of Arts and Sciences,
Sawyer Business School, and Law School.
The Beacon Hill Institute was founded at Suffolk
University in 1991 for the purpose of bringing economic
analysis to bear on current public policy issues.
State Competitiveness, November 2013