Regional Analysis Methods by m4N9Vg

VIEWS: 15 PAGES: 33

									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


• 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?
                                                                                                                     Pittsburgh, 1969-2000

1,600,000



1,400,000


                                                                                                                                                                                                                                            State and local
1,200,000
                                                                                                                                                                                                                                            Military
                                                                                                                                                                                                                                            Federal, civilian
1,000,000
                                                                                                                                                                                                                                            Services
                                                                                                                                                                                                                                            Finance, insurance, and real estate
 800,000                                                                                                                                                                                                                                    Retail trade
                                                                                                                                                                                                                                            Wholesale trade

 600,000                                                                                                                                                                                                                                    Transportation and public utilities
                                                                                                                                                                                                                                            Manufacturing
                                                                                                                                                                                                                                            Construction
 400,000
                                                                                                                                                                                                                                            Mining
                                                                                                                                                                                                                                            Agricultural services
 200,000



      -
            1969
                   1970
                          1971
                                 1972
                                        1973
                                               1974
                                                      1975
                                                             1976
                                                                    1977
                                                                           1978
                                                                                  1979
                                                                                         1980
                                                                                                1981
                                                                                                       1982
                                                                                                              1983
                                                                                                                     1984
                                                                                                                            1985
                                                                                                                                   1986
                                                                                                                                          1987
                                                                                                                                                 1988
                                                                                                                                                        1989
                                                                                                                                                               1990
                                                                                                                                                                      1991
                                                                                                                                                                             1992
                                                                                                                                                                                    1993
                                                                                                                                                                                           1994
                                                                                                                                                                                                  1995
                                                                                                                                                                                                         1996
                                                                                                                                                                                                                1997
                                                                                                                                                                                                                       1998
                                                                                                                                                                                                                              1999
                                                                                                                                                                                                                                     2000
       -
19




           100,000
                     200,000
                               300,000
                                         400,000
                                                   500,000
                                                                                        600,000
  69
19
  70
19
  71
19
  72
19
  73
19
  74
19
  75
19
  76
19
  77
19
  78
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  79
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  80
19
  81
19
  82
19
  83
19
  84
19
  85
                                                             Services




19
  86
19
  87
                                                                        Manufacturing




19
  88
19
                                                                                                  Pittsburgh, 1969-2000




  89
19
  90
19
  91
19
  92
19
  93
19
  94
19
  95
19
                                                                                                                          We can look at a basic view




  96
19
  97
19
  98
19
  99
20
  00
            Or a little more complexity
                    Pittsburgh, 1969-2000

1,000,000


 900,000


 800,000
                                            Resource based
 700,000
                                            Federal
                                            Government
 600,000                                    Local Serving

 500,000                                    Mfg & Trade

 400,000


 300,000


 200,000


 100,000


      -
       69
       70
       71
       72
       73
       74
       75
       76
       77
       78
       79
       80
       81
       82
       83
       84
       85
       86
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       90
       91
       92
       93
       94
       95
       96
       97
       98
       99
       00
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     19
     20
19
   6
   9




                                      0.0%
                                             2.0%
                                                    4.0%
                                                           6.0%




              -6.0%
                      -4.0%
                              -2.0%
19 -19
  70 70
19 -19
  71 71
19 -19
  72 72
19 -19
  73 73
19 -19
  74 74
19 -19
  75 75
19 -19
  76 76
19 -19
  77 77
19 -19
  78 78
19 -19
  79 79
19 -19
  80 80
19 -19
  81 81
19 -19
  82 82
19 -19
  83 83
19 -19
  84 84
                                                           Pittsburgh




19 -19
  85 85
19 -19
  86 86
19 -19
  87 87
19 -19
  88 88
19 -19
  89 89
19 -19
  90 90
19 -19
                                                           United States




  91 91
19 -19
                                                                           Annual Employment Growth, 1969-2000




  92 92
19 -19
  93 93
19 -19
  94 94
19 -19
  95 95
19 -19
  96 96
19 -19
  97 97
19 -19
  98 98
                                                                                                                 Basic benchmarking can be helpful




19 -19
  99 99
     -2
       00
          0
          Basic benchmarking can be helpful
                                  Employment Change, 1970-1993

800,000



700,000



600,000



500,000



400,000



300,000



200,000



100,000



     0
           San Diego   Boise   Tucson      Fresno     Memphis    New Orleans   Toledo   Pittsburgh
But these descriptions still
 haven’t explained much
                       Location Quotients

 Formula                                                        Interpretation
                            High
                                                        Important industries   Important growth
                                                        that may require       industries
Region




                                                        attention


                              Location Quotient
         Industry
                    Total

                                                        Industries of little   Potential emerging
Nation




         Industry                                       promise to local       industries
                                                        economy
                    Total

                            Low



                                                  Low               Employment Growth         High
                 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?
     Albuquerque, 1970-1990
                  Albuquerque          1970             1990 Absolute

                  Region Total       150,901       342,529        191,628
• 127 % total
  employment      Target Region   Year 1       Year 2        Ri
  growth
                  AGSVC                 552         2,268           1,716
• +190,000        CON                 9,028        18,634           9,606
  Jobs            FARM                1,165         1,729             564
                  FED                11,193        14,599           3,406
                  FIRE               12,471        26,569          14,098
• What            MFG                10,453        26,240          15,787
  explains this   MIL                 7,600         8,134             534
                  MIN                 1,388         1,313             -75
  growth?
                  RETAIL             25,424        59,987          34,563
                  STLGOV             19,322        44,475          25,153
                  SVC                36,971       107,068          70,097
                  TRAN                8,253        14,904           6,651
                  WHSALE              7,081        16,609           9,528
                    Three factors…

• Growth of the national economy
• Presence of growth industries (or
  declining ones)
• Local competitive factors
                     Employment             Change
 Albuquerque          1970      1990 Absolute   Percent
 Region Total      150,901   342,529    191,628     127%

                Projected     Diff btw
                at National   US &       Projected   Regional
                Ave.          actual ch. Mix         Shares
                     83,770      107,858      14,595   93,263
              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

Target Region   Year 2       Ri            Ri pct     Mi            Si

AGSVC                2,268         1,716       311%           668           742
CON                 18,634         9,606       106%           504         4,090
FARM                 1,729           564        48%          -748           665
FED                 14,599         3,406        30%        -5,037         2,229
FIRE                26,569        14,098       113%         2,548         4,627
MFG                 26,240        15,787       151%        -6,287        16,271
MIL                  8,134           534         7%        -5,503         1,818
MIN                  1,313           -75        -5%           135          -981
RETAIL              59,987        34,563       136%         2,266        18,183
STLGOV              44,475        25,153       130%        -1,527        15,953
SVC                107,068        70,097       190%        29,770        19,803
TRAN                14,904         6,651        81%        -1,884         3,954
WHSALE              16,609         9,528       135%          -312         5,909
 What are the key industries?

    We can combine statistics on
economic growth, the shift-share, and
  specialization (LQs) to highlight
   leading and lagging industries.
  Finding Key Industries
                                           Sustain
    Identify the
  non-competitive                         Innovate




                         Leading
      factors
                                   Develop the value chain -
Fix them if possible                  Buyers & Supplier


 Not Competitive                        Competitive

Prepare for transition
                         Lagging
                                      Watch the market
  Manage decline
                                     Minimize investment
     Do nothing
          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?
              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?
                     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.
                  Shift-share + benchmarking
                                Shift-Share Comparison, 1970-1993


600,000


                                                                    Regional Shift

400,000
                                                                    Industry Mix


200,000




      0

           San Diego   Boise   Tucson     Fresno      Memphis          New           Toledo   Pittsburgh
                                                                      Orleans
-200,000




-400,000




-600,000
         You may need to normalize the data
                             Regional Shift as a Proportion of Total Change

1.00



0.50



 -
         San Diego   Boise        Tucson      Fresno     Memphis    New Orleans   Toledo   Pittsburgh

(0.50)



(1.00)



(1.50)



(2.00)



(2.50)



(3.00)



(3.50)
 The level of industry detail impacts
       the shift-share analysis
                         2digit 4 digit
 Absolute Change          -10132 -10132
 National Effect           -9450 -9450
 Industry Mix             690.71 -2759
 Local Shift               -1373 2075.2

• More detail increases the accuracy of the
  industry mix effect and the local shift.
       The time frame impacts the shift-
                    share
                 1969      2000          R         N       M           S
1969-2000    1,128,141 1,384,664   256,523   991,947   -4,278   -731,146



                 1969      1988          R         N       M           S
1969-1988    1,128,141 1,205,775    77,634   571,936   -6,419   -487,883

                 1988      2000          R         N       M           S
1989-2000    1,205,775 1,384,664   178,889   297,892   29,909   -148,912

Aggregated                         256,523   869,827   23,491   -636,795

   • 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
Comparing the 3 "Solutions" to missing data

                         R          N          M        S
Complete Data          106,225     67,610      5,990   32,625
Incomplete Data         71,221     67,610      5,990   -2,379
Partial Data            99,926     61,972     11,259   26,695


For Construction         R          N         M        S
Complete Data           10,973      3,694     1,963    5,316
Incomplete Data         10,973      3,694     1,963    5,316
Partial Data            10,973      3,694     1,963    5,316


 1 – estimate nondisclosed data
 2 – ignore nondisclosed data or assume = 0
 3 – exclude missing sectors entirely
                       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

								
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