Minnesota has lagged the nation on Research & Development spending since 2012

Yesterday, I wrote about how the performance of Minesota’s education system is often overstated on commonly used rankings. This matters for the state’s economy.

As we explain in our recent report The State of Minnesota’s Economy: 2018, the key to per capita economic growth is increased productivity; the ability to produce greater output from the same amount of inputs. In the jargon, this is known as Total Factor Productivity. Research by economists Roberto Cardarelli and Lusine Lusinyan at the International Monetary Fund looks at the determinants of this at the state level. They find that “states having better educational attainment and greater investment in R&D” do better on this measure. Having noted how our performance on education leaves room for improvement, how do we fare on R&D spending?

The National Science Foundation produces data on National Patterns of R&D Resources. This gives us data on spending on R&D as a share of GDP at the state level up to 2015. The results can be seen in Figure 1. It may come as a surprise to Minnesotans who are apt to think of their state as a technology leader, but the state currently lags the national average on this measure of R&D spending. Between 2003 and 2011, as a share of GDP, Minnesota devoted more resources to R&D than the national average. But since 2012, our state has lagged the nation. In 2015, the figure for the U.S. was 2.73 percent, in Minnesota it was 2.46 percent.

Figure 1: Research and Development spending as a % of GDP, 2000-2015

Source: National Science Foundation

To repeat, improved productivity is the main source of per capita income growth. The two main drivers of that are education and Research & Development. Our state performs below average in both. This does not bode well for Minnesota’s future economic health.

Please join Center of the American Experiment on Wednesday, January 16th at the Hilton Hotel for a lunch forum with Center economist and author of the new report, “The State of Minnesota’s Economy: 2018,” John Phelan. Learn where Minnesota’s economy stands and where it is headed. Register now

John Phelan is an economist at the Center of the American Experiment.