Social and Behavioral Sciences Commons^™

The Future Of Work In Missouri: Rural-Urban Differences In Entrepreneurship, Sarah A. Low, Austin Sanders, Mark C. White

Center for Applied Economics

This paper identifies the trends and differences in entrepreneurship between Missouri’s metropolitan and nonmetropolitan (rural) areas to better inform policy intended to promote economic development through entrepreneurship. We examine three different entrepreneurship proxies across time, with a focus on how to best encourage rural entrepreneurship and its resilience going into the next business cycle. We also examine the geography of entrepreneurship in Missouri and highlight areas where greater entrepreneurship may offer a sustainable path to greater economic development. This is important for policymakers to consider, because the “entrepreneurial” businesses in rural Missouri offer communities the goods and services often associated …

The Missouri-Wide Effects Of City Earnings Taxes, Howard J. Wall

Center for Applied Economics

The cities of St. Louis and Kansas City, Missouri, impose a 1 percent tax on residents’ earnings and non-residents’ earnings within the cities. This paper provides estimates of the effects of these taxes on the parts of Missouri outside the two metro areas. I estimate that over the decade from 2000 to 2010 the earnings taxes in Kansas City and St. Louis reduced household employment in the taxing cities by about 14,500, and by about 34,700 in the Missouri portions of their surrounding metro areas. When the link between the St. Louis metro area and outstate Missouri is considered, the …

How Do Cities Matter? A Review Of Missouri And Its Recent Economic Growth, Joseph H. Haslag, Brookelyn Shaw

Center for Applied Economics

The purpose of this paper to examine the data on economic growth across cities in the United States to see if the data supports the notion that cities are major contributors to their state’s economic growth. We find that even though cities account for a disproportionate amount of economic growth in a majority of states, merely having a metropolitan area (or two) in your state does not guarantee economic success for the state. As we narrow the focus to Missouri, we find that over the past two decades not one metropolitan area in Missouri ranks higher in growth rates than …

Attracting People And Potential To Missouri And The Region By Metro Status, William H. Rogers

Center for Applied Economics

This report summarizes the Heartland’s recent economic performance relative to the rest of the United States. I focus on two key economic indicators: total population change since 1969 and net domestic migration measured using earning capacity instead of population. I find that the Heartland’s metropolitan areas are significantly lagging the entire rest of the nation in working-age population and working-age earning capacity growth. I also find that the Heartland’s non-metropolitan areas are in absolute decline when viewed through the lens of working-age population and earning capacity. Unlike the metropolitan performance, however, there is nothing exceptional about the non-metropolitan decline. My …

Lack Of Higher Wage Opportunities In Missouri Contributes To Slower Economic Growth, Mallory Rahe

Center for Applied Economics

This paper uses publicly available datasets from federal government agencies to explore differences in income inequality across rural and urban Missouri in the aftermath of the Great Recession to better understand how these factors are associated with relative job loss and job recovery. Previous work has explored various explanations for Missouri’s weak economic performance; could income inequality be a contributing factor? I find that Missouri has lower income inequality than the nation, largely from a lack of high-wage jobs. Missouri, and especially rural Missouri, obtains lower income inequality primarily through a lack of high-income households. Across the nation, rising income …

Missouri: Generation Transformation, Mark Tranel

Center for Applied Economics

While Missouri’s population has grown slowly over the past 50 years its characteristics have evolved in important ways. This paper first describes the contemporary demographic profile of who Missourian are, where and how they live. It then examines the trends over the period 1960 to 2010. The data for Missouri are compared to national characteristics and trends to provide points of similarity and contrast. The factors that have changed, and some that have not, have implications for actions that need to be taken in response to challenges Missouri faces because of these demographic dynamics.

The Best Of Both Skills: U.S. Immigration, Work Visas, And Local Labor Shortages In Missouri, Adriano Udani

Center for Applied Economics

In spite of political rhetoric condemning immigrants’ contributions to the United States, scholars have persistently demonstrated positive social and economic contributions of immigrants. Studies such as these pose important policy implications for Missouri. To what extent does immigration contribute to recent Missouri economic outcomes? How are immigrant workers distributed across Missouri? Are there positive economic outcomes associated only with immigration of high-skilled workers? My analysis shows that higher per capita personal income and higher employment in certain industrial sectors are not solely attributed to high-skill workers. The results here suggest that economic productivity in Missouri is attributed to having a …

Missouri's Economic Future Lies With School Reform, Eric A. Hanushek

Center for Applied Economics

Between 1970 and 2007, Missouri’s growth in income per capita was 41st in the nation. This dismal outcome is largely a function of its educational system. Its schools have not been competitive, either among the U.S. states or internationally. Lifting the quality of schools will by the historical evidence presented here produce large long-run gains for Missouri’s economy. Even though many youth have in the past migrated to other parts of the country, the strength of the Missouri economy will continue to rest mainly on those current students who will become the backbone of the future labor force. Improving the …

Recent Research On The Minimum Wage: Implications For Missouri, Jonathan Meer

Center for Applied Economics

The minimum wage has long been a contentious policy issue, but particularly so in Missouri in recent years. When St. Louis raised its city minimum wage in 2015, with increases planned to $11 per hour by 2018, legal battles held up implementation and a state law eventually overrode the local ordinance. This essay delves into the sources of this policy dispute, first by examining the theoretical issues involved, then focusing on recent research, particularly regarding outcomes other than the traditional focus on employment outcomes. Using minimum wage increases as an anti-poverty policy is not likely to succeed. While the empirical …

Labor Market Freedom And Economic Prosperity: How Does Missouri Compare?, Dean Stansel

Center for Applied Economics

Government restrictions on workers and employers tend to have a dampening effect on their ability to thrive. There have been numerous studies of the relationship between state labor market restrictions and labor market outcomes (as well as economic outcomes in general). As theory would imply, that literature generally has found a positive relationship between labor market freedom and various measures of positive economic outcomes. After a discussion of the concept of economic freedom and how it is measured in labor markets, this paper briefly reviews that literature. It also provides a detailed examination of how Missouri compares to its neighboring …

Reforming Educator Compensation, Michael Podgursky

Center for Applied Economics

While compensation accounts for roughly 90 percent of K-12 instructional costs, there is little evidence of efficient or strategic design in these systems. Rigid salary schedules reward factors generally unrelated to effectiveness, induce field shortages, and encourage inequitable allocation of professional staff. Deferred compensation systems impose sharp penalties on mobility, promote early retirement and generate large unfunded liabilities. Serious attempts to bring greater efficiencies to K-12 spending and raising teacher quality must confront the dysfunctional compensation system.

Measuring Human Capital Across Countries: Iq And The Human Capital Index, Gail Heyne Hafer, R. W. Hafer

Center for Applied Economics

It has been shown that country-level IQ and aggregated performance by school-age children on international assessment tests in math and science are by-in-large capturing analogous indicators of the cognitive human capital. We expand that analysis by comparing country-level IQ to the World Economic Forum’s Human Capital Index (HCI). This index, comprised of several dozen separate indicators, accounts for inputs and outcomes to measure human capital, across age profiles and gender. Two outcomes are of note. First, there is a positive, significant correlation between IQ and the vast majority of the component indicators in the HCI across all age cohorts. Second, …

The State Of The Missouri Economy And Workforce, Timothy J. Gronberg, Dennis W. Jansen, Lori L. Taylor

Center for Applied Economics

This article presents an overview of the state of the Missouri economy. We begin by assessing measures of economic output. Compared to the nation and to neighboring states, Missouri’s economy has hardly grown over the past 20 years. We identify several sources for this lackluster record. Perhaps one of the most important is the observation is that productivity in Missouri—output per worker—is lower than the national average. This poor productivity record quite possibly stems from two sources. One is problematic trends in labor force quality. A key factor here is a lack of commitment by the state to a higher …

City-County Consolidation In St. Louis: An Analysis, Joshua Hall, Josh Matti

Center for Applied Economics

This report provides an analysis and evaluation of the proposed city-county consolidation in St. Louis. The report draws upon theoretical research considering the impact of local government consolidations on efficiency, equity, spillovers, and development. Where possible, we connect the ideas from the academic literature to arguments made regarding the situation in St. Louis. After exploring both the theoretical reasons for and against consolidation, we consider the real-world empirical evidence. Although city-county consolidations sometimes lead to positive outcomes, often they do not. Importantly, the context of consolidation matters. By understanding the importance of context with consolidations, we conclude with five lessons …

Is Growth In Outstate Missouri Tied To Growth In The Saint Louis And Kansas City Metro Areas?, Howard J. Wall

Center for Applied Economics

Because the Saint Louis and Kansas City metro areas together account for well over half of Missouri’s economy, the overall performance of the state is largely determined by the two metro areas. In this study, I see whether the metro areaas are important to the state beyond their relative sizes. That is, I test whether employment growth in the rest of Missouri tends to follow (or be caused by) employment growth in the metro areas.

Tax Credits As A Tool Of State Economic Development Policy, Howard J. Wall

Center for Applied Economics

Tax credits come in many forms and serve an array of purposes, although economic development is central to their existence. Although tax credits come in many forms, they all share a basic structure: They are provided to a private entity for a specific project, usually to enhance the entity’s ability to obtain financing. The holder of a tax credit can apply it against his or her tax liabilities according to its redemption value, its redemption date, and other rules governing the credit.

This paper summarizes the findings in the economics literature on the effectiveness of state tax credits in spurring …

Updated Estimates Of The Effects Of Earnings Taxes On City Growth, Howard J. Wall

Center for Applied Economics

This study provides estimates of the effect of earnings taxes in Saint Louis and Kansas City on population growth in the two cities and their surrounding metro areas. The results of this analysis are consistent with the proposition that the earnings taxes had negative effects on population growth in the City of Saint Louis and Kansas City, and positive effects on the rest of their metro areas. In net, the estimates indicate that the metro areas lost population because of their central cities’ earnings taxes. To summarize:

• About one-half (14,700) of the population decline in the City of Saint Louis …

Taxing Business In Missouri, R. W. Hafer, Howard J. Wall

Center for Applied Economics

If one believes popular rankings of “tax climate” across the states, Missouri fares pretty well. Using generic types of business tax rankings, however, can mask underlying issues that may belie their message. This study uses the Tax Foundation’s 2015 report “Location Matters: The State Tax Costs of Doing Business” to compare total tax rates paid by different types of businesses in Missouri to those paid by similar businesses in other states. Looking at the total taxes paid—not only corporate income taxes, but also property taxes, unemployment taxes, etc.—is crucial to understanding the total or effective burden of state taxes on …

The Missouri Quality Jobs Program: Rearranging The Deck Chairs (And Throwing Some Overboard), Howard J. Wall

Center for Applied Economics

According to the Missouri Department of Economic Development (DED), the Missouri Quality Jobs Program (MQJP) will create 118 new jobs by 2020 for each $1 million dollars in tax credits awarded under the program. The claimed sources of these job gains are the direct increase in employment at the firms receiving the credits, and indirect increases at other firms due to spinoff and multiplier effects. Unfortunately, the DED’s estimates for these effects are based more on faith than on evidence. First, the DED rather naively assumes that all of the job gains at the firms receiving tax credits occur only …

Education, Income, And Social Behavior Across Missouri, Gail Heyne Hafer, R. W. Hafer

Center for Applied Economics

This study investigates the relationship between education and several economic and social outcomes. On the economic side we consider the link between education and income. We also look at how education is related to health choices and social cohesion. Our basic question is: “What is the relationship between educational decisions made in the past and economic and social outcomes today?” Answers to this question reflect not only personal educational choices, but also shed light on the policy issue of why it is important to improve educational attainment.

Are Education And Economic Growth Related? Some Evidence From The States, R. W. Hafer

Center for Applied Economics

It seems common sense that the more educated someone is, the greater the chances that they will have relatively higher incomes. Indeed, on average someone with a college degree is more likely will have a higher lifetime stream of earnings than someone who only graduates from high school. Does this same relationship hold at the state level? Are states with better education outcomes also the states that tend to grow faster? More specifically, what does the evidence on Missouri’s educational achievement predict for the state’s economic future?

We investigate whether differences in economic growth across states are in part explainable …

Is There A Link Between Economic Freedom And State Economic Growth?, R. W. Hafer

Center for Applied Economics

Increasing the reach of government into everyday economic interactions, whether through the government as a consumer/producer or as a taker of taxes, is not likely to create an environment in which economic activity will flourish. Improving economic growth requires that individuals and firms make decisions that allow them to combine labor, capital, and technology to produce goods and services. This means that increased government intrusion into the market, onerous regulations, and lack of competition in labor markets all can hinder economic growth. The question addressed in this study is: Does Missouri’s record in promoting economic freedom help explain its lack …

Improved Estimates Of St. Louis Metro Employment, Howard Wall

Center for Applied Economics

Official employment data for the St. Louis metro area produced by the Bureau of Labor Statistics (BLS) are often unreliable and usually misleading. A major reason for this problem is that the BLS does not make full use of the data at its disposal. To address this, the Institute for the Study of Economics and the Environment (ISEE) at Lindenwood University has developed an alternative employment measure that makes better use of available data. More specifically, the ISEE employment series for the St. Louis MSA undergo rolling benchmark revisions four times a year as data become available. This is in …

How Dangerous Is The U.S. Current Account Deficit?, William Poole

Center for Applied Economics

The U.S. current account deficit has attracted considerable attention from academics, policymakers and market participants. So also has the U.S. international investment position—the difference between U.S.-owned assets abroad and foreign-owned assets in the United States. The net position has become increasingly negative as current account deficits have accumulated over time. I have spoken on international topics several times in recent years, emphasizing the importance of international capital flows for explaining the evolution of the U.S. international accounts. I’ll review some of my prior analysis today, but want to concentrate on the question in my title.

Motivating China To Play Fair In Global Markets, William H. Lash Iii

Center for Applied Economics

This is my second trip here to Lindenwood. I can see the progress that has been made in providing even better facilities for the students in just the year and a half that have elapsed. I appreciate the opportunity to meet again with Lindenwood students and faculty and citizens of St. Charles and St. Louis Counties.

If you ask any nation’s trade officials about trade policy and investment, China will be on the tip of their tongues right now. Everyone is focusing on China. China is the big dragon in the room that is absorbing tremendous amounts of resources: everything …

The Effects Of Globalization: A View From The Developing World, Andrés Mejia-Vergnaud

Center for Applied Economics

Globalization has been hailed as a deliverer and condemned as a destroyer of developing countries. How can globalization elicit such divergent responses? And what do people mean when they praise or condemn globalization?

As you will see in the course of this paper, I will often point to the beneficial effects of free trade and free-markets. The gains from free trade and free markets are indeed relevant from the point of view of public policy: they offer a guide to which sort of policies we should pursue. This doesn’t mean, however, that I believe these positive effects are the main …