Massachusetts is nation's most 'competitive' state

Published on Wednesday, November 19, 2008

Massachusetts ranks 1st among all states in terms of its economic “competiiveness - including its ability to attract and retain business and to provide a high standard of living for its residents over the long run.

The Bay State moved from 2nd last year to 1st this year for its strong showing in human
resources, technology, business incubation and security. Massachusetts rose from 9th to 1st in the measure that tracks the number of residents with health insurance coverage. The state
also improved its ranking for security, thanks to a decrease in crime.

The rating was released this week as part of the Beacon Hill Institute's Eight Annual Competitiveness report.

Massachusetts also continues to outperform all other states in technology, as measured by
grants from the National Institutes of Health, new patents, and its high tech workforce. The
Commonwealth ranks 1st in venture capital per capita, making it, by that measure, the most
attractive state in the union for startups.

Eight of the states that made the top ten last year remained in the top ten this year. Oregon
and Montana moved up. South Dakota dropped out, as did New Hampshire, which slipped
from 9th to 17th as a result of falling scores for security, fiscal policy and business incubation.
New Hampshire ranked 3rd just two years ago.

The BHI competitiveness index is based on a set of 43 indicators divided into eight
subindexes – government and fiscal policy, security, infrastructure, human resources,
technology, business incubation, openness, and environmental policy. The overall index is
an average of the eight subindexes, each of which is itself an average of the indicators
making up that subindex. The index ranges from “1” to “10,” with “10” indicating the best
state in a category and “1” indicating the worst, and is centered on 5. The breadth of the BHI
index distinguishes it from more narrowly focused measures of competitiveness that target
just taxes, high tech, or economic freedom.

“The current economic turmoil forces state policy makers to respond with short term
solutions,” notes Jonathan Haughton, BHI senior economist and lead author of the report.

“The key, however, is to pay attention to the factors that contribute to a state’s economic
growth over the long term. The index continues to show that improvement in a state’s
ranking can translate into a higher standard of living for state residents. Thus, if a state gains
a point in the index, it will also gain $1,546 in real per capita income per year.”
BHI will release its rankings of the top 50 U.S. metropolitan areas in February 2009