Regional Analysis Methods

1. Regional Analysis Methods Benchmarking, Location Quotients, Shift-share

2. 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?

3. 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)

4. 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)

5. 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?

6.  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?

7. How do we interpret Pgh’s Growth?

8. We can look at a basic view

9. Or a little more complexity

10. Basic benchmarking can be helpful

11. Basic benchmarking can be helpful

12. But these descriptions still haven’t explained much

13. Region Industry Total Nation Industry Total Location Quotients Interpretation Formula

14. Shift-Share • 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?

15. Albuquerque, 1970-1990 • 127 % total employment growth • +190,000 Jobs • What explains this growth?

16. Three factors… • Growth of the national economy • Presence of growth industries (or declining ones) • Local competitive factors Diff btw US & actual ch.

17. Brief Glossary • R = actual regional change • N = change due to national growth • M = Industry mix effect • S = regional shift effect

18. 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

19. 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

20. 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.

21. Albuquerque Industry Data

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

23. Not CompetitiveCompetitive Identify the non-competitive factors Fix them if possible Sustain Innovate Develop the value chain - Buyers & Supplier Leading Prepare for transition Manage decline Do nothing Watch the market Minimize investment Lagging Finding Key Industries

24. 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?

25. Manufacturing • 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?

26. Services • 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.

27. Shift-share + benchmarking

28. You may need to normalize the data

29. The level of industry detail impacts the shift-share analysis • More detail increases the accuracy of the industry mix effect and the local shift.

30. The time frame impacts the shift-share • If the industry structure changes dramatically then a longer time frame distorts the industry mix effect.

31. 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

32. Comparing the 3 "Solutions" to missing data 1 – estimate nondisclosed data 2 – ignore nondisclosed data or assume = 0 3 – exclude missing sectors entirely

33. Multipliers • 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