Location (Location, Location) and Innovation |

In my previous post, I discussed evidence indicating that liberal social policies make U.S. states implementing them more innovative.

If so, one would expect that liberal U.S. states are in general more innovative than conservative.

To see if there is any empirical support to this assertion, I plotted a measure of the innovative potential of all 50 U.S. states and the District of Columbia against an estimate of their liberalism or conservatism. 

As a measure of innovation at the state level, I used the 2021 WalletHub State Innovation Index, a set of 22 indicators of innovation-friendliness.

As a measure of ideological orientation, I used a parameter Gallup calls “liberal advantage.” It derives from the 2018 Gallup’s tracking poll in which respondents in all U.S. states were asked to describe their political views as liberal, moderate, or conservative. The liberal advantage is the percentage of people self-identified as a liberal minus the percentage of people self-identified as conservative.

By this measure, the most liberal U.S. state is Massachusetts (liberal advantage +14) while the most conservative is Mississippi (liberal advantage -38).

The results are shown below:

Indeed, there is a reasonably strong correlation (R²=0.44) between the liberal or conservative sentiments in each state and the innovation potential of this state. Liberal states are in general more innovative.

I must emphasize that the above graph suggests only correlation; more data is needed to prove causation, i.e., that it’s the states’ political orientation and not something else, e.g., the amount of money allocated to R&D, that accounts for the lower innovative potential.

And yet, policymakers would be wise to consider state social policies when discussing an investment of federal money into regional innovation projects.

I’d also like to draw attention to one of my previous posts discussing evidence that the ability of a country to innovate correlates with the level of political freedoms in this country.

Remember your real-estate broker’s mantra: location, location, location?