For economic researchers and policymakers, mapping and analyzing the level of similarity between states and regions can be a useful exercise. By identifying the regions with close similarities, decision makers can help narrow their search for successful policies to use in their own communities. This article examines a common methodology for comparing statistical similarities, evaluates how similar Idaho’s economy is to that of the other 49 states and analyzes the overall usefulness of the results.
Using a variation of a common statistical method called a nearest neighbor analysis allows researchers to take a set of observations (in this case, the 50 states) and rank them in order of similarity. For this analysis, the method analyzes the economic composition of each state, based on the employment in each state across 285 different industries. Then the mix of industries in each state is compared according to the percentage of that state’s employment concentrated in that industry.
For example, in Idaho, 33 industry categories had no employees at all in 2018, including pipeline transportation and coal mining. At the other end of the spectrum, Idaho’s largest industry – restaurants – employed more than 52,000 people to make up more than 8 percent of Idaho’s total employment.
