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2013 Nebraska Policy and Issues Summit Nebraska chamber of commerce November 18, 2013 Jonathan Haughton SENIOR ECONOMIST

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. NE: Competitive or not?. The Ratings Cacophony. Key ideas.

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2013 Nebraska Policy and Issues Summit Nebraska chamber of commerce November 18, 2013 Jonathan Haughton SENIOR ECONOMIST

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  1. 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 NE: Competitive or not?

  2. The Ratings Cacophony

  3. Key ideas • 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

  4. Personal Income per capita

  5. NE: Muted recession damage

  6. Competitiveness Is … • 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.

  7. The Big Picture: Top 5 + Neighbors 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.

  8. NE: The trend • Ranks: • 2005 7 • 2006 11 • 2007 11 • 2008 14 • 2009 17 • 2010 6 • 2011 6 • 2012 11 8th over the whole period

  9. NE: The subindexes

  10. NE: Government and fiscal policy

  11. NE: Infrastructure

  12. NE: Business Incubation

  13. NE: Openness (weak spot)

  14. Subindex 1: Government & Fiscal Policy NE Strengths Budget surplus % GDP 4 NE Weaknesses Govt. employees/residents 46 • Colorado 22 • Iowa 27 • Kansas 35 • Missouri 4 • Nebraska 23 • Massachusetts 33 • Mississippi 13

  15. Subindex 2. Security NE Strength BGA integrity index 6 • Colorado 4 • Iowa 15 • Kansas 23 • Missouri 37 • Nebraska 18 • Massachusetts 3 • Mississippi 45

  16. Subindex 3: Infrastructure NE Strengths Travel time to work 3 Apartment rental cost 8 Electricity prices 9 NE Weaknesses Mobile phones/capita 41 High-speed lines/capita 34 • Colorado 4 • Iowa 29 • Kansas 7 • Missouri 13 • Nebraska 16 • Massachusetts 33 • Mississippi 41

  17. Subindex 4: Human Resources NE Strengths Unemployment rate 2 % adults in labor force 2 NE Weaknesses Physicians/residents 35 • Colorado 15 • Iowa 4 • Kansas 16 • Missouri 28 • Nebraska 7 • Massachusetts 1 • Mississippi 50

  18. Subindex 5: Technology NE Strengths S&E graduates/capita 10 NE Weaknesses Patents/capita 39 High-tech employment 33 • Colorado 7 • Iowa 19 • Kansas 26 • Missouri 27 • Nebraska 25 • Massachusetts 1 • Mississippi 45

  19. Subindex 6: Finance/Business NE Strengths Minimum wage 5 NE Weaknesses Venture capital/capita 39 Tort index 33 • Colorado 18 • Iowa 30 • Kansas 20 • Missouri 39 • Nebraska 28 • Massachusetts 12 • Mississippi 24

  20. Subindex 7: Openness NE Weaknesses Employment in foreign MNCs 42 • Colorado 39 • Iowa 38 • Kansas 27 • Missouri 43 • Nebraska 40 • Massachusetts 8 • Mississippi 45

  21. Subindex 8: Environment NE Strength Carbon emissions/square mile 9 • Colorado 19 • Iowa 24 • Kansas 12 • Missouri 33 • Nebraska 11 • Massachusetts 28 • Mississippi 23

  22. NE: Long-Term Issues (in bottom 15) • 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)

  23. Index up 1 point, PCI up $1,893 Real personal income per capita = 30,873 + 1,893 × Competitiveness Index 2011 p=0.01 R2 = 0.23 PI per capita deflated using a spatial pNEce index (Aten et al. 2011)

  24. Applied to NE • 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.

  25. 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.

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