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METHODS OF REGIONAL ANALYSIS: SHIFT-SHARE

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METHODS OF REGIONAL ANALYSIS: SHIFT-SHAREIs the local economy growing or declining? Is this the best use of public funds? What industries should be targeted? How does our community compare with other communities? These are among the many questions that urban planners, regional analysts, and ecoWhat is Shift-Share?The Texas electronics industry, for example, gained about 10,475 jobs between 1997 and 2000. What factors explain this 8.3 percent growth? The shift-share technique has been used to answer this type of question. The technique is based on the assumption t...And the Formula IsSS = NS + IM + RSSS Shift-ShareNS National ShareIM Industry MixRS Regional ShiftThe equations for each component areNS ilocalt-1 • USt /USt-1IM \(ilocalt-1 • iUSt /iUSt-1\) - NSRS ilocalt-1 • \( ilocalt /ilocalt-1 - iUSt What do the subscripts and superscripts and alphabets mean?ilocalt-1number of local jobs in an industry (i) at the beginning of the analysis period (t-1)ilocalt number of local jobs in an industry (i) at the end of the analysis period (t)USt-1 total number of jobs in the nation at the beginning of the analysis period(t-1)USt total number of jobs in the nation at the end of the analysis period (t)iUSt-1number of jobs, nationwide, in industry (i) at the beginning of the analysis period (t-1)iUSt number of jobs, nationwide, in industry (i) at the end of the analysisperiod (t)The National Share (NS) measures by how much total employment in a local area increased because of growth in the national economy during the period of analysis. For example, all else being equal, if employment in the U.S. economy grew by 10% during theAnd this helps me, how?As an academic exercise, shift-share analysis divides local economic growth into its component parts. Returning to the electronics example, a shift-share analysis would show how much of the 10,475 person increase in the Texas electronics industry was dueWhere can I get Data to run the Analysis?It’s not that difficult to conduct a shift-share Depending on the level of geography and industry detail, analysts have used gross state product, personal income, value-added, and employment numbers. Employment data is preferred simply because it is readily available at all geographies and all industrywww.census.gov/epcd/cbp/view/cbpview.htmlThe U.S. Bureau of Labor Statistics also provides employment data by industry for every state and county through its Covered Employment (ES-202) data series. The ES-202 data may be accessed at www.bls.gov/data/The Texas Workforce Commission also provides Covered Employment and Wages datahttp://www.twc.state.tx.us/lmi/lfs/type/coveredemployment/coveredemploymenthome.htmlIn addition, the Workforce Commission has a shifthttp://socrates.cdr.state.tx.us/iSocrates/ShShare/shshare.aspHere’s an Example,Suppose that the state’s economic development tasPare the request down to a narrow and manageable Texas Manufacturing Industry Employment DataSource: U.S. Bureau of Labor Statistics, Covered Employment and Wage Data, www.bls.gov/data/The data indicates that—over a three-year period—Interpreting the Data AnalysisIn 1997, nearly 1.078 million workers were employ1.083 = 1.157 - 0.092 + 0.018ActualNS IMRSNational Share \(NS\): Had the state’s manufacIndustry Mix \(IM\): There is usually a differRegional Shift \(RS\): The difference between Top 5 Leading Manufacturing Industries (1997-2000)Electronics and Electronic EquipmentRubber & Miscellaneous ProductsFabricated MetalsStone, Clay, & Glass ProductsLumber & Wood ProductsTop 5 Lagging Manufacturing Industries (1997 - 2000)Instruments and Related ProductsApparelChemicals & Allied ProductsMachinery except ElectricalFurniture & FixturesThe results clearly indicate that the Texas manufacturing industry outperformed its national counterpart during the expansionary period, 1997-2000. Based on the identification of leading and lagging industries, this analysis suggests that manufacturing rLimitations of the Shift-Share TechniqueThe shift-share technique is only a descriptive tool. It should be used in combination with other analyses to determine a region's economic potential. Shift-share does not account for many factors including the impact of business cycles, identification oAdditional Information on Regional MethodsWeb Sites:Regional Research Institute’s Web Book of Regionawww.rri.wvu.edu/regcweb.htmHubert H. Humphrey Institute’s Economic Developmewww.hhh.umn.edu/slp/edwebDRI-WEFAhttp://www.dri-wefa.com/the_list/Articles on Shift-Share Analysis:Houston, David B. \(April 1967\). “The shift aStevens, Benjamin H. and Craig L. Moore. \(NovemTexas Workforce Commission. “Shift-share analysishttp://socrates.cdr.state.tx.us/iSocrates/files/ShiftShareNarrative.pdfText Books:Bendavid-Val, A. 1991. Regional and Local Economic Analysis for Practitioners. Westport, CT: Prager Publishers.Blair, John P. 1995. Local Economic Development: Analysis and Practice. Thousand Oaks, CA: Sage Publications.METHODS OF REGIONAL ANALYSIS: SHIFT-SHARE Is the local economy growing or declining? Is this the best use of public funds? What industries should be targeted? How does our community compare with other communities? These are among the many questions that urban planners, regional analysts, and economic developers tackle day-to-day. To answer such questions, analysts rely on a standard toolkit: a set of quantitative methods that include population projection techniques, shift-share analysis, economic base analysis and location quotients, input-output analysis, optimization techniques, and benefit-cost analysis. In most cases, analysts need only a spreadsheet program– e.g. Excel, Quattro Pro, or Lotus123– to apply any of the regional methods. In this article, a popular method for identifying competitive industries is described. What is Shift-Share? The Texas electronics industry, for example, gained about 10,475 jobs between 1997 and 2000. What factors explain this 8.3 percent growth? The shift-share technique has been used to answer this type of question. The technique is based on the assumption that local economic growth is explained by the combined effect of three components: national share, industry mix, and regional shift. Thus, one can apply shift-share to determine how much each component contributes to local economic growth. In addition, the shift-share technique may be used to identify a local economy’s competitive industries. A competitive industry


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