What drives Indiana's economy?
Everyone knows the answer to that question. But they have different answers. A large portion of Hoosiers will tell you that agriculture (including forestry, fishing and hunting) is the backbone of Indiana's economy. However, others are equally certain that manufacturing is the dominant force in the state's economy.
Farmers buy inputs from all sorts of firms that depend on them and their products go to the tables of every household. Nonetheless, businesses and households depend on durable manufactured goods to get to work (e.g., automobiles) and nondurables to stay healthy and beautiful (pharmaceuticals and cosmetics).
All of these products need to be moved from place to place. That puts transportation and warehousing right in the middle between producers and consumers. Well, not quite because we need retail in there as well--both with and without brick-and-mortar stores.
Indiana's gross domestic product (GDP) is the foremost measure of value added by Indiana's economic sectors. Figure 1 tells the tale. Agriculture and its relatives have not been as much as 2.5% of Indiana's GDP at any time between 1997 and 2019. In half of those 22 years, that share has been less than 1.2%, and has fallen as low as 0.8%. That would be a remarkable backbone if it can serve as such while constituting so little of the state's economy.
Durable goods manufacturing would have a better claim. Although not praised as the economy's backbone, it has been called the state's beating heart. It ranged from a high of 19.5% of Indiana's GDP in 1998 to a low of 12.2% in 2009. When we add in nondurable goods, manufacturing's total share of our GDP reached a peak at 30.9% in 1998 and a low of 26.4% in...