Massachusetts has the best economy

The index is based on measures of how global, IT-driven and entrepreneurial each state is, as well as how much their economies are based on knowledge and innovation.

A "lack of innovation-based vitality has contributed to our continuing recession," said Robert Litan, Kauffman's vice president of research and policy. States need to focus on "providing the entrepreneurial resources and access that are critical to boosting competitiveness within the global marketplace," he added.

Massachusetts has ranked No. 1 on the Index for the last five years it was produced. Second in the rankings this timeis Washington, cited for its strength in software and aviation -- think Microsoft and Boeing -- its use of digital technology, and its lively entrepreneurial activity in the Puget Sound region. Maryland ranks third -- for the third time running -- for its plethora of knowledge workers, many of them from the Washington, D.C., area. In fourth place is New Jersey followed by Connecticut.

I started a business in paradise!

At the bottom of the index are states with economies that depend on either natural resources or manufacturing. Mississippi is in last place -- it got low marks for workforce education and having relatively few workers in managerial, professional or tech jobs and workforce education. Rounding out the bottom 5 are West Virginia (No. 49), Arkansas (No. 48), Alabama (no. 47) and Wyoming (46).

Wyoming ranked low even though residents saw incomes rise rapidly in recent years. That's because that growth has been largely based on higher demand for and prices of natural resources in the state. "While yielding impressive performance in the short term, this is not a winning strategy for the long run," the report says, because the state's economy becomes too dependent on global price fluctuations.

States should focus on expanding broadband, supporting entrepreneurship, and investing in research, said Robert Atkinson, president of the Information Technology and Innovation Foundation and co-author of the Index. If they did that, he said, "they -- and the nation as a whole -- would be far more globally competitive." 

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