Conte, director of communications & information services
at the Beacon Hill Institute
ranks third in nation on competitiveness index A Civic CaucusFocus on CompetitivenessInterview September
Fred Zimmerman, Pat Davies,
Audrey Clay, Janis Clay, Rick Dornfeld, Paul Giljie (coordinator),
Randy Johnson, Sallie Kemper, Dan Loritz (chair), Paul Ostrow,
Since 2001, the Beacon Hill Institute (BHI)
at Suffolk University has produced an
annual index on state competitiveness. The report analyzes 43
indicators divided into eight sub-indexes - government and fiscal
policy, security, infrastructure, human resources, technology,
business incubation, openness, and environmental policy.
Frank A. Conte, director of communications and information services at
the Beacon Hill Institute, discussed the drivers of state
competitiveness and the limits of their study. He argued that
competitiveness is the ability of a nation, state, or region to
generate economic growth. Generally, this conception favors
economically resilient areas with diverse economies (e.g.
Conte manages the Beacon Hill Institute's State Competitiveness
Project. He is responsible for all aspects of BHI's
computer infrastructure and the Institute's web site.
Prior to joining BHI,
Conte was a contributing columnist to the East Boston
Sun-Transcript, and Journal-Transcript Newspapers. He holds
a B.S. in English and Government from
Suffolk University and a M.S. in Public Policy from the
of Massachusetts, Boston.
Economic diversity is key to resiliency.
Conte argues that cities such as
Boston and states like Massachusetts and Minnesota did not suffer as
much as other places during the Great Recession due to their
diversified economies, which helped them better weather the downturn.
More broadly, he attributed this ability to thrive in several
different economic sectors as the basis for their competiveness.
Conte said that "competitiveness" is a broad term with varying
meanings. Generally, competitiveness is the ability of a nation,
state, or region to generate high per-capita income, while at the same
time generating economic growth. And during this struggle for
competitiveness, high performers try to maintain their position, while
low-performers are looking to develop a comparative advantage in some
Beacon Hill Institute competitiveness index measures the capacity of
states to promote economic growth in the form of higher personal
First published in 2001, the index was developed by
Dr. Jonathan Haughton of Suffolk University. He based the index on
Dr. Michael Porter of the Harvard Business School. Porter was
interested in ways that business firms best deploy their capital to
increase their competitiveness.
Critics of competitiveness argue that in the race to be more
competitive, states would implement bad policies such as protectionist
trade measures. However, at the state or regional level, governments
are unable to set trade policy and generally operate under the same
macroeconomic conditions nullifying much of this particular criticism.
to Conte and the BHI
Minnesota is a highly competitive state. In 2012, Minnesota ranked
third in the United States. Of the 43 indicators that make up the
has three primary strengths:
Reputation for reform-oriented
Strong labor force that attracts
There are limitations to the indicators of the index, but it remains a
strong predictor of competitiveness.
Minnesota does generally well in many of the measures. However, Conte
cautioned that the utility of the indicators is limited. Though
weighted equally, the decision to include some indicators over others
Conte also admited that getting up-to-date information and determining
what indicators are most useful also presents challenges to creating
an accurate index. In the past, the Beacon Hill Institute
competitiveness index used the number of phone lines in a state to
measure connectivity, but then replaced it with cell phones due to the
rise of mobile technology. However, it is unclear whether this is an
fact, there is a debate in macroeconomics about whether recent
technologies, such as cell phones and tablet computers, actually drive
economic growth. For further information on this topic, Conte
recommended the research of
Dr. Robert Gordon at Northwestern University.
Conte did note that despite the limitation of the Beacon Hill
Institute index, it continues to be a strong predictor of personal
outlined four areas where, according to the BHI
could improve, including:
State and local taxes per capita
Unemployment insurance payments
Academic science and engineering
Cost of labor adjusted for
Conte added that while
has improved its overall ranking during the past six years, these
measures do not paint a full picture either. For example, while
Minnesota ranks low in academic science and engineering, the state
does well in other science and engineering measures such as
"employment in high-tech industries."
Why these indicators? There
is great debate among economists about whether tax cuts impact
business relocation decisions, but Conte believes that any serious
survey needs to include fiscal measures. Additionally, measures like
unemployment insurance payments are included because they function as
a fiscal drag if they discourage the unemployed from seeking work.
There are limits to the ability of a state to affect its
suggested (as has columnist Thomas Friedman and others) that the world
is getting "flatter," which has increased the flow of global trade and
capital. The end result is that that fiscal resources readily and
regularly enter markets that present the greatest opportunities for
profit. This phenomenon has reduced the ability of states and
countries to control their economic competitiveness.
Conte also explained that human capital is more mobile than in the
past. Citing Charles Tiebout's 1956
Pure Theory of Local Expenditures, Conte suggested that
cities and states price the cost of public services to attract
taxpayers - similar to the way business prices goods or services to
attract customers. While this hyper-competitive environment may reduce
the ability of states or regions to control their destiny, Conte
argued that we should view this increased openness as a positive.
Manufacturing no longer drives prosperity. As
Conte explained, high-tech employment traditionally has been an area
of strength for
Massachusetts. The state first attracted these jobs by investing in
the biosciences and then subsidizing pharmaceutical manufacturers like
Bayer. And despite this large investment by
a recent report from the Beacon Hill Institute reports that computer
manufacturing, life science, and pharmaceutical jobs are declining in
According to Conte,
states or regions were once able to create broad prosperity through
manufacturing jobs and in more recent years - through high-tech
manufacturing. However, the availability of these jobs continues to
decline even in places like China. The primary driver of this demise
has been technology.
What can states do?
Conte suggests that in this new reality, where technology and fierce
global competition are the driving economic forces, states should
adopt new strategies. And considering the difficulty in predicting
what new industries may drive future prosperity, Conte argues that
states should try to develop the foundations of growth: providing
high-quality public education and infrastructure, and doing their best
to provide for the poor.
Who drives competitiveness, business or government?
Conte argued for a middle position - that neither business nor
government alone can drive competitiveness. He explained that while
the primary driver of competiveness is indeed business, that does not
diminish the role that government can play.
Conte pointed to evidence showing that research institutions (colleges
and universities) are critical to developing innovation, new
technology, and eventually new businesses. Public institutions also
can be drivers of human capital. For example,
is a net importer of students and hospital patients, providing both an
educated population and customers for health care providers.
the decline of manufacturing, Conte suggested that states should be
thinking about "tradable" vs. "non-tradable" jobs. Health care and
research are good examples of "non-tradable" sectors because the
infrastructure and start-up costs make moving financially prohibitive.
Though these industries are unlikely to generate broad prosperity like
manufacturing once did, they can help to anchor a state or regional
The competitiveness debate is certain to continue.
Conte ended by explaining that there is a rich current debate in
economics about competitiveness. He argued that competitiveness is not
an end in itself that leads to prosperity, but, instead, it is a
starting point. Conte said he believes that by studying
competitiveness, we can better understand the issues that states
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