New Study Finds Social Capital, Entrepreneurship among Top Indicators of How Well States are Managed

Contact: Doug Gavel
Phone: 617-495-8290
Date: August 16, 2004

CAMBRIDGE, MASS - Why are some states managed well, while others languish? New research from Harvard University’s Kennedy School of Government attempts to answer that question by analyzing data culled from the Government Performance Project, conducted by Syracuse University’s Maxwell School of Citizenship and Public Affairs.

In their working paper, “The Management Performance of the U.S. States,” Kennedy School scholars David C. King and Richard J. Zeckhauser, along with recent Kennedy School graduate Mark T. Kim, looked at 10 variables within three broad categories for explaining the wide variations among the states in management performance: government institutions, the political and social environment in each state, and the state’s business environment. Their findings suggest that states that are high in social capital, states with professional legislatures, and states with vibrant entrepreneurial economies are more likely to be better managed than states that have fewer of these resources.

In fact, social capital – defined as “dense networks of friends and associations, where inter-personal trust is fostered and political organizing is most easily done” – is the “single best predictor of how well a state government is managed.” Minnesota, Virginia, Utah and Vermont are among those earning top marks.

Other findings in the working paper indicate that states are better managed when:

Legislatures are run by adequately paid, full-time elected officials
Favorable conditions and incentives exist that readily attract new businesses and entrepreneurs, who “tend to be a force for effective government”
States learn and adopt best practices from other states, especially those that are “friends and neighbors” and compete for workers and management talent from the same labor pools.
A state’s tax burdens, on the other hand, bear no correlation to how well the state is being managed. “Higher taxes are not associated with better-managed governments,” nor do “low taxes signal…that a state is well run,” the researchers found. Neither does the state’s dominant political ideology nor the political competition have any bearing on how well or poorly a state is run.

“Public management succeeds in a business environment that encourages and rewards risk-taking,” the paper concludes. “It succeeds in states that have dense networks of friends and associations, where inter-personal trust is fostered and political organizing is most easily done. And professional legislatures – well staffed and with members who are paid well enough to become full-time experts in various policy domains – appear to be a hallmark of successful state governments.”

To read the paper in its entirety, go to http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP04-028?OpenDocument

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