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Regional Analysis Methods. Benchmarking, Location Quotients, Shift-share. Agenda. Review Shift-Share What is it? How do you do it? What does it mean? Tools for interpreting Cautions and limits Multipliers Policy Map?. First Assignment – Q1.

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Regional Analysis Methods

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Regional Analysis Methods

Benchmarking, Location Quotients, Shift-share


  • Review

  • Shift-Share

    • What is it?

    • How do you do it?

    • What does it mean?

      • Tools for interpreting

    • Cautions and limits

  • Multipliers

  • Policy Map?

First Assignment – Q1

  • What was the population of Allegheny County in 2000 and 2004 (Census or BEA)? 

    • 2000: 1,279,817 (BEA - REIS or Census July 1est.)

    • or 2000: 1,281,666 (Census 2000 (SF1) - April 1 estimate)

    • 2004: 1,247,512 (BEA-REIS)

First Assignment Q2-4

  • How many total jobs were available in Allegheny County in 2004?

    • 861,868 (BEA total employment)

  • How many Allegheny County residents were employed in 2004?

    • 604,203 (BLS, CPS/LAUS)

  • What was the total "covered" employment in 2004?

    • 685,878(BLS, QCEW)

Second Assignment - I

  • When you are benchmarking one region against another, there are many factors to consider in the selection of an appropriate benchmark.  Name two (2):

  • If you are studying a region with dynamic annual changes, what is the best method to calculate the growth rates?

  • You should never use a location quotient for what purpose?

 Second Assignment Part 2

  • There a several considerations for interpreting a location quotient.  Name two (2): 

  •  What is the difference between a firm and an establishment?

How do we interpret Pgh’s Growth?

We can look at a basic view

Or a little more complexity

Basic benchmarking can be helpful

Basic benchmarking can be helpful

But these descriptions still haven’t explained much







Location Quotients




  • What are the 3 components of a shift-share analysis?

  • A competitive industry is defined as WHAT?

  • Explain

    • National share

    • Industry Mix

    • Regional Shift

  • What are the limits of shift-share?

Albuquerque, 1970-1990

  • 127 % total employment growth

  • +190,000 Jobs

  • What explains this growth?

Three factors…

  • Growth of the national economy

  • Presence of growth industries (or declining ones)

  • Local competitive factors

Diff btw US & actual ch.

Brief Glossary

  • R = actual regional change

  • N = change due to national growth

  • M = Industry mix effect

  • S = regional shift effect

Growth of the U.S. Economy

  • If Alb had grown at the U.S. rate, it would have added 83,770 jobs.

  • The growth of the U.S. economy accounted for 83,770, or 44% of the actual change.

  • Alb in fact added more than 191,000 jobs – so something else must explain the region’s growth

The mix of industries in the region

  • The presence of growth industries were not a major factor in the region’s performance. Growth industries on the whole accounted for 8% of the actual change, which equaled 14,595 jobs.

  • Must add jobs faster than the nation as a whole to have a positive Mix effect

Local competitive factors

  • The shift-share analysis estimates that 49% of the growth in employment is the result of local competitive conditions.

  • 93, 263 of the jobs created in Albuquerque were due to these local advantages

  • These advantages were spread across every industry but one – Mining.

Albuquerque Industry Data

What are the key industries?

We can combine statistics on economic growth, the shift-share, and specialization (LQs) to highlight leading and lagging industries.

Not CompetitiveCompetitive

Identify the



Fix them if possible



Develop the value chain -

Buyers & Supplier


Prepare for transition

Manage decline

Do nothing

Watch the market

Minimize investment


Finding Key Industries

State and Local Gov

  • It is a large industry in the region with considerable growth.

  • It is not a growth industry nationally – but this industry does not move on strictly national dynamics.

  • It is a desirable goal to growth this industry?


  • Still somewhat small – only 7% of regional employment, less then 27,000 employees.

  • Potential emerging sector in the region, but the sector is declining nationally

    • Can Alb capture more of this industry and for how long?

    • Are there subsectors in which the region has a concentration and an advantage that are growing?


  • Employment in Services accounts for 25% of the region’s employment (comparable to the US share).

  • The industry grew by 70,000 jobs in the region (190%), well above national and industry growth

  • Local factors were positive, but contributed less to the growth than national and industry factors.

Shift-share + benchmarking

You may need to normalize the data

The level of industry detail impacts the shift-share analysis

  • More detail increases the accuracy of the industry mix effect and the local shift.

The time frame impacts the shift-share

  • If the industry structure changes dramatically then a longer time frame distorts the industry mix effect.

Strategies for missing data

  • Ignore it

  • Find an alternative source

  • Estimate missing midpoint data with an average or linear projection

  • Use the proportion of the industry from a higher level of geography

  • Project the missing data based on regional growth

  • Project the missing data based on national industry growth

Comparing the 3 "Solutions" to missing data

1 – estimate nondisclosed data

2 – ignore nondisclosed data or assume = 0

3 – exclude missing sectors entirely


  • What is a multiplier?

    • Based on industry input-output

  • How do you use them correctly

    • Change in final demand

    • Substitution

    • Total vs. direct vs. indirect jobs

  • Sources

    • RIMS II

    • IMPLAN

    • REMI

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