1. Metro Area and State Competitiveness Report 2002 Metro Area and State Competitiveness Report 2002 Beacon Hill Institute at Suffolk University 8 Ashburton Place Boston, MA 02108 617-573-8750 www.beaconhill.org 8 Ashburton Place Boston, MA 02108 617-573-8750 www.beaconhill.org Jonathan Haughton Senior Economist Corina Murg Economist Jonathan Haughton Senior Economist Corina Murg Economist

2. Metro Area and State Competitiveness Report 2002 A Question What do Seattle, San Francisco, Boston, Denver and Minneapolis have in common? Ans: Competitiveness Index > 6.7; they are the top ranked cities.

3. Metro Area and State Competitiveness Report 2002 Competitiveness? What does this mean? Why does it matter? What are the implications for policy?

4. Metro Area and State Competitiveness Report 2002 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?

5. Metro Area and State Competitiveness Report 2002 Michael Porter: “Wealth is actually created at the microeconomic level” Implication: Policies at this level are very important. Why Competitiveness Matters

6. Metro Area and State Competitiveness Report 2002 Focus on 50 Metro Areas (163m) Population, m NY21.2 LA16.4 Chicago 9.2 Washington 7.6 San Francisco 7.0 Philadelphia 6.2 Population, m Boston5.8 Detroit5.5 Dallas-FW5.2 Providence1.2 Hartford1.2 Richmond1.0

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

8. Metro Area and State Competitiveness Report 2002 Components Boston index Boston rank - Government and fiscal policy3.8743 - Security6.60 2 - Infrastructure5.2817 - Human resources7.52 1 - Technology8.43 1 - Finance and cost5.9010 - Openness4.6928 - Domestic competition6.0410 - Environmental policy5.0525 OVERALL7.00 3

9. Metro Area and State Competitiveness Report 2002 1. Government & Fiscal Policy

10. Metro Area and State Competitiveness Report 2002 2. Security

11. Metro Area and State Competitiveness Report 2002 3. Infrastructure

12. Metro Area and State Competitiveness Report 2002 4. Human Resources

13. Metro Area and State Competitiveness Report 2002 5. Technology

14. Metro Area and State Competitiveness Report 2002 6. Finance and Cost

15. Metro Area and State Competitiveness Report 2002 7. Openness

16. Metro Area and State Competitiveness Report 2002 8.Domestic Competition

17. Metro Area and State Competitiveness Report 2002 9. Environmental Policy

18. Metro Area and State Competitiveness Report 2002 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

19. Metro Area and State Competitiveness Report 2002 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

20. Metro Area and State Competitiveness Report 2002 Weak Performers New Orleans: poor scores on crime, human resources, and technology Buffalo: weak on fiscal policy and finance, as well as domestic competition.

21. Metro Area and State Competitiveness Report 2002 The Index Fits Well Real personal income per capita = 21,105 + 2,226 Indicators Index. R 2 = 0.29 t = 8.2 t = 4.4

22. Metro Area and State Competitiveness Report 2002 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.

23. Metro Area and State Competitiveness Report 2002 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

24. Metro Area and State Competitiveness Report 2002 Policy 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.

25. Metro Area and State Competitiveness Report 2002 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.

26. Metro Area and State Competitiveness Report 2002 Other 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).