Metro Area and State Competitiveness Report 2002 Metro Area and State Competitiveness Report 2002...

Metro Area and State Competitiveness Report 2002Metro Area and State Competitiveness Report 2002

Metro Area and State Metro Area and State Competitiveness Report Competitiveness Report 20022002

Metro Area and State Metro Area and State Competitiveness Report Competitiveness Report 20022002

Beacon Hill Institute at Suffolk UniversityBeacon Hill Institute at Suffolk University8 Ashburton PlaceBoston, MA 02108

617-573-8750

www.beaconhill.org

8 Ashburton PlaceBoston, MA 02108

617-573-8750

www.beaconhill.org

Jonathan HaughtonSenior Economist

Corina MurgEconomist

Jonathan HaughtonSenior Economist

Corina MurgEconomist


A QuestionA Question

• What do Seattle, San Francisco, Boston, Denver and Minneapolis have in common?

• Ans: Competitiveness Index > 6.7; they are the top ranked cities.


Competitiveness?Competitiveness?

• What does this mean?

• Why does it matter?• What are the

implications for policy?


A metropolitan area 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.

Michael Porter Competitiveness =“the

microfoundations of prosperity.”

What Is Competitiveness?What Is Competitiveness?


Michael Porter: “Wealth is actually created at the microeconomic level”

Implication: Policies at this level are

very important.

Why Competitiveness MattersWhy Competitiveness Matters


Focus on 50 Metro Areas (163m)Population, m

NY 21.2

LA 16.4

Chicago 9.2

Washington 7.6

San Francisco 7.0

Philadelphia 6.2

Population, m

Boston 5.8

Detroit 5.5

Dallas-FW 5.2

Providence 1.2

Hartford 1.2

Richmond 1.0


Metro Area Metro Area Competitiveness IndexCompetitiveness Index

- grouped into 9 sub-indexes; - 42 objective indicators for each of 50

largest metro areas- final index: normalized average of the

sub-indexes;- indexes scaled from 0 (least

competitive) to 10, with mean of 5 and SD of 1.


ComponentsComponents

Boston index Boston rank- Government and fiscal policy 3.87 43- Security 6.60 2- Infrastructure 5.28 17- Human resources 7.52 1- Technology 8.43 1- Finance and cost 5.90 10- Openness 4.69 28- Domestic competition 6.04 10- Environmental policy 5.05 25

OVERALL 7.00 3


1. Government & Fiscal Policy

Rank Index

Taxes as a % of current GSP 22 5.16

Workers' compensation collections per employee 26 5.47

Unemployment payments per unemployed worker 50 1.84

Bond rating: S&P's/Moody's composite 30 4.92

State bond rating 39 4.43

Boston


2. Security

Rank Index

Crime index change 1999-2000, % 18 5.33

Violent crimes per 100,000 inhabitants 15 5.54

Thefts per 100,000 inhabitants 2 6.61

Murders per 100,000 inhabitants 1 6.35

Boston


3. Infrastructure

Rank Index

Mass transit availability 4 6.20

Travel time to work 41 4.16

% of households with computers 11 5.61

% of adults online 15 5.57

Median household gross rent 43 3.96

Boston


4. Human Resources

Rank Index

High school finishers as % of 18-year olds 11 5.73

% of population that graduated from high school 8 5.85

Enrollment in degree-granting institutions per capita 4 6.57

% of labor force represented by unions 26 4.76

Unemployment rate 6 6.23

% of adults in the labor force 25 5.05

% of population born abroad 14 5.24

% of population without health insurance 6 6.18

Infant mortality rate, deaths per 1000 live births 3 6.57

Nonfederal physicians per 100,000 inhabitants 1 7.63

Boston


5. Technology

Rank Index

Academic R&D funding relative to employment 2 6.47

NIH support to institutions per capita 1 9.58

New patents issued per 100,000 inhabitants 6 5.86

Science & engineering grad. students per capita 1 8.59

Scientists and engineers in the labor force 1 7.83

High tech payroll as % of total payroll 7 6.11

Boston


6. Finance and Cost

Rank Index

Bank deposits per capita 4 6.72

Venture capital as % of Gross Metro Product (GMP) 4 6.19

Cost of living 50 3.27

Boston


7. OpennessRank Index

Exports per capita 18 5.10

Air passengers per capita 31 4.48

Boston


8. Domestic Competition

Rank Index

Net firm creation per 100,000 inhabitants 2 6.67

New publicly traded companies 4 6.01

Cognetics entrepreneurial hot spot index 35 4.56

Boston


9. Environmental Policy

Rank Index

Pollution standards index 8 5.92

Serious pollution days p.a. 15 5.71

Toxic release, pounds per capita 14 5.23

Electricity prices, $ per mbtu 46 3.26

Boston


Where Does Boston Stand?Where Does Boston Stand?

• Boston ranks 3rd- Strengths:

- Human resources - Technology - Security

- Also- Finance- Competition

- Main Weakness: - Government policy

- Near middle of pack

- Infrastructure- Environment- Openness


Other High Performers

• Seattle: scores high on openness, infrastructure, domestic competition, environment

• San Francisco: strong human resources, technology, finance, openness and domestic competition

• Denver: broad-based strengths; below average only in finance

• Minneapolis: strong human resources, openness, and environmental policy


Weak Performers

• New Orleans: poor scores on crime, human resources, and technology

• Buffalo: weak on fiscal policy and finance, as well as domestic competition.


The Index Fits WellThe Index Fits Well

Real personal income per capita = 21,105 + 2,226 Indicators Index. R2 = 0.29 t = 8.2 t = 4.4


State Competitiveness

• Stability between 2001 and 2002 rankings

• Biggest drop:

Alaska from 22 to 34• Biggest rise:

PA from 37 to 27• Notable:

CA from 10 to 16.

2002 2001Delaware 1 1Massachusetts 2 2Washington 3 4Colorado 4 6Connecticut 5 8Wyoming 6 3Vermont 7 5New Hampshire 8 7Minnesota 9 9Oregon 10 13

California 16 10

Louisiana 47 48West Virginia 48 49Arkansas 49 47Mississippi 50 50

Rank


The Pattern of Competitiveness

• Geography does not determine success: top 10 are widely spread

• But 10 worst are disproportionately east of the Mississippi

• Of the 10 worst performers, two each are in CA, FL, NY and TN.

• State and metro performance are not necessarily correlated:– Raleigh: 7 NC: 35

– Austin: 6 TX: 28

But

- Boston: 3 MA: 2


Policy ImplicationsPolicy Implications

Examples• Boston: Fiscal restraint; attention to high

cost of living; some concern about openness.

• Hartford: Fiscal restraint; need for more competition; concern about environment.

• Los Angeles: Needs attention to environment, and to finance.


Implications for Recovery

• Competitiveness is a medium- to long-run concept

• Boston’s fundamentals are good– The problems are “the trappings of success”– It will rebound nicely.

• Michael Porter said the same in 1991-92.


Other ReportsOther Reports

• Robert Atkinson and Paul Gottlieb, The Metropolitan New Economy Index, Progressive Policy Institute and Center for Regional Economic Issues, April 2001.

• Index of the Massachusetts Innovation Economy by the Massachusetts Technology Collaborative, Dec 2002.

• Index of Economic Freedom by John Byars, Robert McCormick and Bruce Yandle of Clemson University;

• Index of Economic Freedom by the Heritage Foundation (constructed for the countries of the world rather than for the states).

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