Economy may not depend on state policy

New research from the University of Connecticut indicates the economic health of the Nutmeg State may depend less on the actions of state politicians than previously thought.

The study, published in September and conducted by economics professor Steven Lanza, used advanced statistical techniques to determine the extent to which Connecticut’s unemployment problem is caused by unemployment shocks to the nation as a whole. Lanza modeled the Connecticut economy as requiring six financial quarters to react to shocks originating outside the state, arguing that although technically a longer time period would encompass more data, the model would be too complex to be useful.

He found that if economic shocks occurred at the state and national level, 75 percent of the change in unemployment that would result in Connecticut after two financial quarters could be attributed to local factors. However, after four quarters, state factors would only explain 25 percent of the change in unemployment within the state — the other 75 percent would be attributable to national economic conditions. Thus, Lanza’s study concluded that in the long run, Connecticut lawmakers have little to do with the health of the state economy.

“We can’t expect miracles, but even small changes, added up over many years, might have a considerable effect,” Lanza said in his study. “When power is limited it’s all the more important to use that influence to certain effect which, in turn, raises the stakes on getting the policy right.”

Despite Lanza’s conclusion that state politicians have a negligible effect on state economic health, Mark Abraham of DataHaven said that this analysis does not adequately take into account variation within the local economy.

“Within New Haven, just to give an example, the official unemployment rates are 4 percent in high-income neighborhoods like East Rock and Westville, but are 18 percent in the city’s low-income neighborhoods,” Abraham said. “If unemployment drops from 9 percent to 8 percent in our region, but these disparities continue to grow or even become worse, are we really better off?”

Abraham said that using growth as an indicator of the general health of the economy can hide other factors that contribute to wellbeing and that “in the long run … local and state governments have an equal amount of control over comprehensive community development, through policies like zoning and taxation — and national policies can change to meet local needs.”

Ward 7 Alderman Doug Hausladen ’04 said that as a local policymaker himself, the conclusion of the study is not relevant to his responsiblities. Hausladen said that the goal of local policy makers is not necessarily to maximize employment.

“I want policy to be a platform for where any company can grow here,” he said. “I also think we should focus on health, community and wellbeing.”

Hausladen cited bike infrastructure as an example of this phenomenon. While providing adequate bike infrastructure will not necessarily boost employment in New Haven, such investment benefits the health and wellbeing of locals residents on a day-to-day basis.

The Connecticut economy has grown at a lower rate than the national average since the conclusion of World War II.

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