(Minnetonka, MN) — A new report released today from Center of the American Experiment sounds a warning about the drastic fall in the per capita growth rate of Minnesota’s economy compared to the other 49 states. In every year since 2014, Minnesota’s per capita GDP growth has been slower than that of the United States generally. In other words, while Minnesota’s GDP per capita is growing, it is not keeping up with the country as a whole, putting us at a competitive disadvantage.
The ranking of Minnesota’s mean, real per capita GDP growth among the 50 states fell from 17th in 2008-2014 to 37th in 2014-2023.
The report utilized use a technique known as “growth accounting” to break down the observed rate of change in real per capita GDP into the shares derived from changes in human capital, physical capital, and Total Factor Productivity (TFP) to identify the sources of Minnesota’s relative growth slowdown. While the state continues to lead in human capital because of our high employment rates and education, we are falling behind in physical capital and TFP, most notably in manufacturing.
“Minnesota must shift our focus to improving physical capital, entrepreneurship and innovation if we hope to improve per capita GDP growth and keep up with the competition,” said John Phelan, economist at Center of the American Experiment and author of the report. “Per capita GDP growth is the most important measure of a state’s economy and this report sounds a warning that Minnesota is falling behind.”
Key findings from the report include:
- What matters for economic well-being is income – or GDP – per capita and Minnesota’s recent performance has been concerning.
- Minnesota’s level of GDP per capita was $4,658 above that of the United States generally as recently as 2014. That “premium” had now disappeared, and we are now a below average per capita GDP state.
- In every year since 2014, per capita GDP grew more slowly in Minnesota than in the United States generally. Only Wisconsin matches this record.
- Minnesota’s decline relative to the United States was not driven by a few high-performing states. The state’s average annual real growth rate of GDP per capita fell from a rank of 17th out of 50 states in 2008-2014 to 37th in 2014-2023.
- This decline occurred even though Minnesota’s real per capita GDP growth rate rose from an annual average of 0.8 percent in 2008-2014 to 1.1 percent in 2014-2023. Other states did better.
- Minnesota’s mean annual growth rate of physical capital per capita fell from 24th out of 50 states in 2008-2014 to 37th in 2014-2023.
- Minnesota’s fall in the rankings of growth was driven by the Manufacturing sector, which accounts for the second-largest share of the state’s physical capital stock. The average annual growth rate of physical capital here fell by 2.7 percentage points from 2008-2014 to 2014- 2023, falling by an average -0.2 percent annually in the latter period.
A copy of the complete report can be accessed here: `
Accounting for Growth: Measuring the sources of per capita economic growth at the state level
