1 Economic Prosperity in Kentucky: Energy, Environment, and Other Factors Presentation to the 2014 Governor’s Conference on Energy and the Environment: The Changing Landscapes in Kentucky Michael Childress Center for Business and Economic Research University of Kentucky October 7, 2014

2 Where do people work?

3 What about all the coal jobs?

4 Mining Employment in the Wider Economic Context

5 How do we measure economic prosperity?

6 Another look at economic prosperity

7 Keys to Prosperity State Growth Empirics: The Long-Run Determinants of State Income Growth (Federal Reserve Bank of Cleveland) Examined income changes from 1939 to 2004 Basic question—why do some states do better than others? –Knowledge Stocks (educational achievement/patents) –Industry Structure Negative association with manufacturing and mining –Other (e.g., climate, taxation, regulation)

8 The “Brain Hubs” Phenomenon Individual factors, like educational attainment, are vital for economic prosperity But sometimes where you live is just as important as what you know UC Berkeley economist Enrico Moretti, The Geography of Jobs, writes about “brain hubs” or “innovation clusters” –Thick labor market for highly specialized innovation- driven workers and support personnel—as well as a lot of “social interaction”

9 How does this relate to us? Richard Florida –The quality of place matters to the economy What’s there (the natural and built environment) Who’s there (the people) What’s going on (what people are doing, our relationship with the natural and built environments). The quality of Kentucky’s environment has important economic development implications

10 The Importance of Education

11 What about electricity prices?

12 Energy consumed per GDP

13 Cheap Electricity and Economic Prosperity

14 Does this mean that “cheap” energy isn’t important? No, it means is that “cheap” electricity is just one of many factors.

15 Site Selection Factors

16 What about all the coal jobs?

17 Poverty Rates by County, 2011

18 Transfer Payments by County, 2011

19 A Long-Term Economic Challenge

20 Bachelor’s Degree by County

21 Broadband by County

22 Michael Childress