Private Sector: Innovate, educate. Knowledge is not just power, it’s also money — and Pennsylvania is slipping

What makes incomes grow? Business leaders, policymakers and educators all seem to be searching for the keys that will unlock growth opportunities in a state or region. We know that brainpower is more important than brawn in the Information Age, but what specific aspects of knowledge are most useful?

A new study featured in the Federal Reserve Bank of Cleveland’s 2005 annual report (available at http://www.clevelandfed.org) sheds some fresh light on this question. Authored by Federal Reserve Bank of Cleveland economists Paul Bauer and Mark Schweitzer and Case Western Reserve University professor Scott Shane, the study finds that differences in state income levels can be explained largely by two factors: innovation and education. States that make the most of their knowledge base are the ones that are likely to prosper.

The study shows that states that foster inventiveness, as measured by number of patents per resident, can gain economic dividends that endure for generations. The same is true for education — residents of states that sustain a high proportion of high school and college graduates can enjoy significantly higher long-term incomes. This "knowledge stock" is a good predictor of a state’s future economic prospects.

By Sandra Pianalto

Full Story: http://www.post-gazette.com/pg/06227/713448-28.stm