The 2010 State New Economy Index
68 Pages Posted: 18 Nov 2010 Last revised: 1 Dec 2017
Date Written: November 1, 2010
This report builds on four earlier State New Economy Indexes published in 1999, 2002, 2007, and 2008. The purpose of the State New Economy Index is to measure the economic structure of states. Unlike some reports, which assess state economic performance or state economic policies, this report focuses more narrowly on a simple question: To what degree does the structure of state economies match the ideal structure of the New Economy? For example, we know that a defining characteristic of the New Economy is that it is global. Therefore, the Index uses a number of variables to assess how globally linked a state’s economy is.
Lack of available data compromises use of many factors appropriate for measuring New Economy structure. Going forward, the federal government can and should play a much more active role in defining variables that should be measured at the state level and collecting the data to better measure them.
Overall, the report uses twenty-six indicators, divided into five categories that best capture what is new about the New Economy: knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and technological innovation capacity.
Like the 2002, 2007, and 2008 Indexes, this report controls for a state’s industry-sector mix when considering variables that measure company behavior (R&D, exports, patents, manufacturing value-added). Holding the industry mix constant is important because some industries by their nature export, patent, spend more on R&D, or have higher value added than others do. For example, without controlling for industry mix, Washington State would score very high in manufacturing exports because the aviation sector (i.e., Boeing) is so large, and exports are a large share of that industry’s output. Accounting for a state’s industrial composition presents a more accurate measure of the degree to which companies in a state, irrespective of the industry they are in, export, invest in R&D, or patent.13 Similarly, manufacturing value-added is measured on a sector-bysector basis, ensuring that a state’s companies are compared to the nationwide performance of firms in the same industry.
Because the 1999, 2002, 2007, 2008, and 2010 reports use slightly different indicators and methodologies, the total scores are not necessarily comparable. Therefore, a state’s movement to a higher or lower overall rank between reports does not necessarily reflect changes in its economy.
Keywords: state new economy index, new economy, transformation, economic, index, innovation, globalization
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