A Search for the New Knowledge Economy

• Establishing a Baseline: The Economy Today…and Tomorrow

• When they Vote with their Feet, where do they go?

• A New Entrepreneurship Index

What about the Great American

Bread Machine?

United

Stat

esBraz

il

Bangla

desh

Russia

Mexico

Vietna

m

German

y

Turkey

Congo

(Kins

hasa

)

France Ita

ly

South

Africa

Spain

Colombia

Tanza

nia

Kenya

Algeria

Ugand

aPeru

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

2010 Population, Top 40 Countries, absent China & India

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Share of U.S. Families with annual Income equal to or greater than $75,000Constant 2006 Dollars

Perc

enta

ge o

f all

Fam

ilies

1940

1942

1944

1946

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000Federal Register Pages: 1940-2010

Source: Crews (2010, 38).

1930

1933

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

-36.00%

-33.00%

-30.00%

-27.00%

-24.00%

-21.00%

-18.00%

-15.00%

-12.00%

-9.00%

-6.00%

-3.00%

0.00%

3.00%

6.00%

9.00%

Federal Deficit as Percent of GDP1930-2009

U.S. 8.9% Alabama 9.3% Huntsville 8.2%

DateJu

l-91

Feb-92

Sep-92

Apr-93

Nov-93

Jun-9

4

Jan-9

5

Aug-95

Mar-96

Oct-96

May-97

Dec-97

Jul-9

8

Feb-99

Sep-99

Apr-00

Nov-00

01M6

2-Jan

2-Aug

3-Mar

3-Oct

4-May

4-Dec

5-Jul6-F

eb6-S

ep7-A

pr7-N

ov8-J

un9-J

an9-S

ep

10-A

pr

10-N

ov105000

110000

115000

120000

125000

130000

135000

140000

145000

150000

Total Employed, 16 and Over, Seasonally AdjustedHousehold Survey, with Trend

1/1991 - 3/2011

Thou

sand

Housing Starts Seasonally Adjusted Annual Rate, In Millions

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

01 02 03 04 05 06 07 08 09 100.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Housing Starts: Aug @ 598K

Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

2001

q1

2001

q3

2002

q1

2002

q3

2003

q1

2003

q3

2004

q1

2004

q3

2005

q1

2005

q3

2006

q1

2006

q3

2007

q1

2007

q3

2008

q1

2008

q3

2009

q1

2009

q3

2010

q1

2010

q3

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0Real GDP Growth, 2000-2010

with 4-quarter moving average

Growth

Organization Date 2011FRB 11/2010 3.0-3.6

NBE 11/2010 3.2

Wachovia 12/2010 2.5

BOA 12/2010 2.0-2.5

Economy.com 12/2010 3.8

Kiplinger 12/2010 3.5

CBO 1/2011 3.1

Bank of America 1/2011 3.1

Wachovia 2/2011 3.2

Economist Mag. 3/2011 3.3

GDP Forecast, 2011

TWO KEY U.S. INDICATORS

National Mortgage Delinquencies, 1Q2010, 90+ Days

15

Unemployment RateDecember 2010

Greater than 12.5%10.0% to 12.5%8.0% to 10.0%

6.0% to 8.0%Less than 6.0%

County Unemployment Rate

Source: US Department of Labor and Wells Fargo Securities, LLC

I wonder what’s going on inside the

Huntsville economy.

Huntsville MSA, Per Capita Income, % of U.S., 1969-2008

Huntsville MSA, Per Capita Real GDP, % of U.S. Metro, 2001-2009

Mining/Logging Const 4%Mfg.11%

Trade, Trans, Util

14%

Info.1%

Finance

3%

Prof. Bus. Svcs.23%

Educ/Health8%

Liesure/Hosp.8%

Other Svcs.4%

Government24%

Huntsville/Madison AL MSA Sectors, 2010

Mining/Logging1%

Construct4%

Mfg.9% Trade, Trans,

Util19%

Info.2%

Finance6%

Prof. Bus. Svcs.13%

Educ/Health15%

Liesure/Hospitality

10%

Other Svcs.4%

Govern

ment17%

U.S. Employment Sectors, 2010

What of the next two Years???

Alabama?Huntsville?

U.S.?

December 2007

April 2011

June 2009

Voting with their Feet

Voting with their Feet

When voting with their feet.

Where do the brains head?

Toward freedom? security?

•

NET 1995-2000 INTERNAL MIGRATION OF PEOPLE WHO WERE 25-39, SINGLE & COLLEGE EDUCATED

PERCENT OF 2000 POPULATION

L A

ID

A Z

U T

M T

W Y

N M

C O

A L

F L

S C

T N

K Y

INO H

N C

S D

K S

N E

M N

W I

IA

IL

M O

A R

M S

O K

N D

O R

C A N V

W A

T X

M I

G A

A K

H I

P A

ME

N Y

C T

W V

D E

M D

N J

V TN H

M A

R I

0 .0 9 % p lus

0 % to 0 .0 8 9 %

-0 .1 % to 0 %

-0 .2 % to -0 .1 1 % B e lo w -0 .2 %

V A

L A

ID

A Z

U T

M T

W Y

N M

C O

A L

F L

S C

T N

K Y

INO H

N C

S D

K S

N E

M N

W I

IA

IL

M O

A R

M S

O K

N D

O R

C A N V

W A

T X

M I

G A

A K

H I

P A

ME

V A

N Y

C T

W V

D E

M D

N J

V TN H

M A

R I

1 to 1 0 (1 0 s ta te s )

1 1 to 2 0 (1 0 )

2 1 to 3 0 (1 0 )

3 1 to 4 0 (1 0 ) 4 1 to 5 0 (1 0 )

CREATIVITY INDEX 2003 RANKINGS

How did we model migration?

MIGRATION = f(PCI, PBS, EFI, FFI, CRI)

Migration : Share of 2000 population for 25-39 year old in-migrants, 1995-2000.PCI : Per capita income, 2000.PBS : Professional Business Services, share of employment, 2000.EFI : Economic Freedom Index, 1999.FFI : Fiscal Freedom Index, 1999.CRI : Richard Florida Creativity Index, 2003.

What did we learn?

1. Go-getters are not attracted by higher income locations.2. They are highly attracted to large PBS states.3. Economic freedom is a strong positive4. They love “cool” states.5. They hate taxes.

When they move, what moves them?

Freedom?

Cool?

Income?

Cities?

Knowledge Economy?

We asked this question by way of statistical models. Our final model included a new Knowledge Economy Index. We also included a Freedom Index, a creativity index, and other economic variables.

Knowledge Economy Index

Index is based on statistical modeling of per capita income across the 50 states. Variation in income is explained by 1) education variable, 2) industry R&D expenditures weighted by employment, and 3) the relative number of fast growth firms (INC 500 & Deloitte Technology fast 500).

Regression coefficients are used as weights applied to state data to build index

IDAHO

ARIZONA

UTAH

MONTANA

WYOMING

NEW MEXICO

COLORADO

TENNESSEE

OHIO

NORTH CAROLINA

SOUTH DAKOTA

KANSAS

NEBRASKA

IOWA

OKLAHOMA

NORTH DAKOTA

OREGON

NEVADA

WASHINGTON

ALASKA

W.V.

PENNSYLVANIA

NEWYORK

RHODE ISLAND

CONNECTICUT

DELAWARE

MARYLAND

NEW JERSEY

NEW HAMPSHIRE VERMONT

MASSACHUSETTS

2008 Knowledge Economy Index

TEXAS

GEORGIA

HAWAII

CALIFORNIA

WISCONSIN

ILLINOIS

MISSOURI

ARKANSAS

LOUISIANA

KENTUCKY

ALABAMAMISS.

FLORIDA

SOUTHCAROLINA

MAINE

MICHIGAN

INDIANA

MINNESOTA

VIRGINIA

1 - 10

11 - 20

21 - 30

31 - 40

41 - 50

State Quintiles

IDAHO

ARIZONA

UTAH

MONTANA

WYOMING

NEW MEXICO

COLORADO

TENNESSEE

OHIO

NORTH CAROLINA

SOUTH DAKOTA

KANSAS

NEBRASKA

IOWA

OKLAHOMA

NORTH DAKOTA

OREGON

NEVADA

WASHINGTON

ALASKA

W.V.

PENNSYLVANIA

NEWYORK

RHODE ISLAND

CONNECTICUT

DELAWARE

MARYLAND

NEW JERSEY

NEW HAMPSHIRE VERMONT

MASSACHUSETTS

Mercatus Overall Freedom Index

TEXAS

GEORGIA

HAWAII

CALIFORNIA

WISCONSIN

ILLINOIS

MISSOURI

ARKANSAS

LOUISIANA

KENTUCKY

ALABAMAMISS.

FLORIDA

SOUTHCAROLINA

MAINE

MICHIGAN

INDIANA

MINNESOTA

VIRGINIA

1 - 10

11 - 20

21 - 30

31 - 40

41 - 50

State Quintiles

2008 Economic Freedom & Knowledge Index Rankings

0

5

10

15

20

25

30

35

40

45

50

55

0 5 10 15 20 25 30 35 40 45 50 55

Knowledge Economy Ranking

Econ

omic

Fre

edom

Ran

king

Kansas

Georgia

Colorada Utah

New HampshireVirginia

Delaware Arizona

Hawaii

NebraskaMinnesota

South Carolina

Montana

North Carolina

Alabama

Missouri

Iowa

Rhode Island

New York

CaliforniaNew Jersey

VermontMichigan

Washington

Maryland

Connecticut

Massachusets Oregon

S. DakotaIdaho

Wisconsin

N. Dakota

OklahomaNevada

Wyoming

Arkansas

Mississippi

Indiana

Maine

New Mexico

Alaska

Texas

FloridaTennessee

Louisiana

Kentucky

W. Virginia

OhioPennsylvania

Illinois

0 5 10 15 20 25 30 35 40 45 500

5

10

15

20

25

30

35

40

45

50

Series1

State Ranks for Average Migration Rate Rank 2004-08

International Migration

Dom

estic

Mig

ratio

n

MIGRATION = f(KEI, OFI, CRI, COL, PCI , POP)

Migration: Average annual in-migration of 25-39 year olds, 2004-2008.

KEI : Knowledge economy index, 2008, Watkins-Yandle.OFI : Overall freedom index, 2008, Mercatus.CRI : Creativity index, Richard Florida, updated 2008.COL : Cost of living index, 2009, Council for Community

& Economic Research.PCI : Per capita income, 2008.POP : Average population, 2004-2008.

What did we learn?

1. Domestic and international movers prefer urbanized states.

2. International movers head toward highly ranked knowledge economy states; domestic movers are indifferent.

3. Domestic and international movers are high on overall economic freedom.

4. “Cool” locations matter to domestic movers but not to international movers.

5. Personal freedom matters to international movers, but not to domestic movers.

OVERALL: Freedom matters.

MSA State Rank

Austin Texas 1Charlottesville Virginia 2Lexington Kentucky 3Raleigh-Durham-Chapel Hill North Carolina 4Atlanta Georgia 5Huntsville Alabama 6Gainesville Florida 7Tallahassee Florida 8Charlotte-Gastonia-Rock Hill North & South Carolina 9Richmond-Petersburg Virginia 10Fort Walton Beach Florida 11Columbia South Carolina 12Naples Florida 13Dallas-Fort Worth-Arlington Texas 14Jackson Mississippi 15Norfolk-Virginia Beach-Newport News Virginia 16Orlando Florida 17Melbourne-Titusville-Palm Bay Florida 18Asheville North Carolina 19Sarasota-Bradenton Florida 20Auburn-Opelika Alabama 21Charleston-N. Charleston South Carolina 22Houston-Galveston-Brazoria Texas 23Wilmington North Carolina 24Cincinnati-Hamilton Ohio 25

Southern MSA Knowledge Economy Index

State RankRaleigh-Durham-Chapel Hill NC 1Huntsville AL 2Atlanta GA 3Charlotte-Gastonia-Rock Hill NC-SC 4Columbia SC 5Auburn-Opelika AL 6Asheville NC 7Charleston-North Charleston SC 8Wilmington NC 9Greenville NC 10Savannah GA 11Nashville TN 12Knoxville TN 13Athens GA 14Birmingham AL 15Tuscaloosa AL 16Greenville-Spartanburg-Anderson SC 17Montgomery AL 18Memphis TN-AR-MS 19Fayetteville NC 20

Regional MSA Index Ranking

FINDING THE NEW ENTREPRENEUR

ONE-PERSON FIRMS

Toward a Nonemployer Entrepreneurship Index

Firms & Establishments, 2008 Nonemployers Establishments Prof., Scientific, Tech N/E PST/Non

U.S. 21,351,320 7,601,169 3,028,695 2.80 14.0%ALA 311,388 103,875 30,897 2.99 9.9Huntsville 25,760 9,557 3,603 2.70 13.9

Auburn 8,464 2,464 1,099 3.43 13.0Tuscaloosa 12,005 4,469 1,202 2.70 10.0

Austin 130,728 40,134 26,275 3.28 19.9Durham 35,923 11,680 7,864 3.01 21.8Greenville 40,780 15,781 5,295 2.58 12.9

MSA Nonemployers/Enterprises

Prof. Technical & Scientific/Nonemployers

In dex = P,T&S share of total enterprise

Rank

Austin, TX 3.28 19.9% .65 1

Durham, NC 3.01 21.8 .65 1

Houston-Galveston-Brazoria, TX

3.77 14.2 .54 2

Gainesville, FL 2.64 19.8 .52 3

Dallas-Ft. Worth-Arlington, TX

3.48 14.8 .52 3

Atlanta, GA 3.33 14.7 .49 4

Auburn-Opelika, AL 3.43 13.0 .45 5

Tallahassee, FL 2.64 16.7 .44 6

Naples, FL 2.91 14.6 .42 7

Charlottesville, VA 2.67 21.0 .42 7

Lexington, KY 2.70 15.6 .42 7

Sarasota-Bradenton, FL 2.81 14.1 .40 8

Cincinnati-Hamilton, OH/KY 2.67 15.0 .40 8

Jackson, MS 3.17 12.2 .39 9

Huntsville, AL 2.70 13.9 .38 10

Nonemployer Firm Entrepreneurship Index

QUESTIONS