2013 NEBRASKA POLICY AND ISSUES SUMMITN E B R A S K A C H A M B E R O F C O M M E R C EN O V E M B E R 1 8 , 2 0 1 3

J O N AT H A N H AU G H T ONS E N I O R E C O N O M I S T, B E A C O N H I L L I N S T I T U T E P R O F E S S O R , D E PA R T M E N T O F E C O N O M I C S , S U F F O L K U N I V E R S I T Y

J H A U G H T O N @ S U F F O L K . E D U

State Competitiveness, November 2013

NE: Competitive or not?

The Ratings Cacophony

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Key ideas

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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,

weaknessNE: Knocking at the top 10

Some others are improving Several problems need attention

Personal Income per capita

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NE: Muted recession damage

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Competitiveness Is …

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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.

The Big Picture: Top 5 + Neighbors

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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.

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NE: The trend

Ranks: 2005 7 2006 11 2007 11 2008 14 2009 17 2010 6 2011 6 2012 11

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8th over the whole period

NE: The subindexes

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

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NE: Government and fiscal policy

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

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NE: Infrastructure

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

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NE: Business Incubation

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

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NE: Openness (weak spot)

NE index

Exports/capita 5.01

Employment in foreign MNEs 3.97

% foreign-born 4.60

Overall 4.26

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Subindex 1: Government & Fiscal Policy

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NE StrengthsBudget surplus % GDP 4

NE WeaknessesGovt. employees/residents 46

Colorado 22Iowa 27Kansas 35Missouri 4Nebraska 23

Massachusetts 33Mississippi 13

Subindex 2. Security

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NE StrengthBGA integrity index 6

Colorado 4Iowa 15Kansas 23Missouri 37Nebraska 18

Massachusetts 3Mississippi 45

Subindex 3: Infrastructure

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NE StrengthsTravel time to work 3Apartment rental cost 8Electricity prices 9

NE WeaknessesMobile phones/capita 41High-speed lines/capita 34

Colorado 4Iowa 29Kansas 7Missouri 13Nebraska 16

Massachusetts 33Mississippi 41

Subindex 4: Human Resources

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NE StrengthsUnemployment rate 2% adults in labor force 2NE WeaknessesPhysicians/residents 35

Colorado 15Iowa 4Kansas 16Missouri 28Nebraska 7

Massachusetts 1Mississippi 50

Subindex 5: Technology

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NE StrengthsS&E graduates/capita 10NE WeaknessesPatents/capita 39High-tech employment 33

Colorado 7Iowa 19Kansas 26Missouri 27Nebraska 25

Massachusetts 1Mississippi 45

Subindex 6: Finance/Business

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NE StrengthsMinimum wage 5

NE WeaknessesVenture capital/capita 39Tort index33

Colorado 18Iowa 30Kansas 20Missouri 39Nebraska 28

Massachusetts 12Mississippi 24

Subindex 7: Openness

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NE WeaknessesEmployment in foreign MNCs

42

Colorado 39Iowa 38Kansas 27Missouri 43Nebraska 40

Massachusetts 8Mississippi 45

Subindex 8: Environment

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NE StrengthCarbon emissions/square mile

9

Colorado 19Iowa 24Kansas 12Missouri 33Nebraska 11

Massachusetts 28Mississippi 23

NE: Long-Term Issues (in bottom 15)

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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)

Index up 1 point, PCI up $1,893

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Real personal income per capita = 30,873 + 1,893 × Competitiveness Index

2011 p=0.01

R2 = 0.23PI per capita deflated using a spatial pNEce index (Aten et al. 2011)

3500

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4500

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Applied to NE

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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.

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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.