constraints as the national economy. An example is that labor is much more mobile between regions than between countries, with individuals able to move more quickly toward job opportunities. In addition, regional migration trends can affect growth for long periods. Any explanation of regional growth patterns, he said, must recognize these factors.

There are also barriers to the flow of economic activity across state borders. Regions actively compete for new and expanding businesses, and depend on the growth of industries that produce “exports”—goods and services sold beyond their borders. The manufacturing sector is one of the most export-intensive activities, he said, and the output of manufacturing circulates and multiplies within a regional economy to create a large “ripple effect.” Healthcare services is also an export sector in some regions, including northeast Ohio. This sector both attracts patients from throughout the Midwest, based on the reputation of the Cleveland Clinic and other facilities, and acts as a magnet in attracting firms engaged in biotech, pharmaceuticals, and medical devices. Such firms commonly act as engines of economic growth.

Many factors create disparities in growth among regions, he said, factors which interact in complex and dynamic ways. “The existing industrial structure can determine growth for a number of years. Each region inherits its industrial structure from historically determined factors, especially the costs of doing business, including tax rates, capital costs, wage rates, real estate prices, energy costs, and health care costs.” Increasingly important, he said, are “labor force skills, access to markets, access to capital, research and development, innovation capacity, and “quality of place” issues.” In the future, he predicted, new factors are likely to emerge.

A Review of the Milken S&T Index

The most recent index had been released a few months earlier, using five composite categories with a total of 77 individual components. For example, the research and development composite had 18 components, beginning with Federal R&D, Industry R&D, and Academic R&D. The 50 states were ranked in “tiers” of 10 by colors on a map of the U.S. Those in the top tier were portrayed in green, the second tier in yellow, the third in orange, and the fourth in red. He said that many of the region’s leading the R&D category were clustered together by region “because knowledge is generated, transmitted, and shared more efficiently in close geographic proximity.”

“To build a new industry cluster, the research and innovation capacities of a region are critical,” Mr. DeVol said. “You can start a new cluster by importing firms that have commercialized technology elsewhere, but those regions that have the basic research and development activities have an advantage in building a cluster than can hold together over the long term.”

The R&D composite, he said, measured type of R&D funding as well as how funds are spent. Also, everything was calculated on a per capita basis. He noted substantial strength in the Northeast, New England, the Mid-Atlantic



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