Shift Share

Introduction

Shift share analyses provide a way to determine a region’s relative competitiveness compared to a larger economy as a whole, and generate a picture of how well a region’s mix of industries are performing, as well as how individual industries are performing within that region.

Shift share involves breaking regional employment growth into three components:

  • A national share (growth) component, \(NS\): Share of regional growth attributable to growth of the national economy
  • An industry mix (proportional) component, \(IM\): The share of regional growth attributable to the industrial composition or mix within the region
  • A regional share (differential) component, \(RS\), The share of regional growth attributable to regional advantage or competitiveness (1). This is often the most important component, and identifies a region’s leading and lagging industries

Inputs

shiftshare

[Click to Enlarge]

Dataset Input: a dataset containing contains the variable to be tested.

Key Column: the unique identifier for the regions.

Regional Industry Employment t-1: the column in the dataset that corresponds to the regional industry employment at time \(t-1\) – the earlier time period.

Regional Industry Employment t: the column in the dataset that corresponds to the regional industry employment at time \(t\) – the later time period.

Benchmark Industry Employment t-1: the benchmark industry employment at time \(t-1\) – represents the employment in the industry across the larger economy (usually the country) at the earlier time period.

Benchmark Industry Employment t: the benchmark industry employment at time \(t\) – represents the employment in the industry across the larger economy (usually the country) at the later time period.

Benchmark Total Employment t-1: the benchmark total employment at time \(t-1\) – represents total employment as a whole across the larger economy (usually the country) at the earlier time period.

Benchmark Total Employment t: the benchmark total employment at time \(t\) – represents total employment as a whole across the larger economy (usually the country) at the later time period.

Outputs

A dataset containing national share, industry mix and regional share, as well as total shift share, for each region.

Advanced

The following formulae are used in the implementation of the shift-share. The three components are calculated as follows:

\(NS_i = e_{i,t-1}\left(\frac{E_t}{E_{t-1}}\right)\)

\(IM_i = e_{i,t-1}\left(  \frac{E_{i,t}}{E_{i,t-1}} –  \frac{E_t}{E_{t-1}}  \right)\)

\(RS_i = e_{i,t-1}\left( \frac{e_{i,t}}{e_{i,t-1}} – \frac{E_{i,t}}{E_{i,t-1}}\right)\)

Where:
\(e_{i,t}\) is the regional employment in industry \(i\) \(E_i\) is the national employment in industry \(i\) regional and national employment respectively in industry \(i\); \(e\) and \(E\) are regional and national total employment respectively in all industries; and \(t-1\) is the initial period and \(t\) the end period of the analysis. The total shift share for a region is then the sum of each of the components:

$$Delta e_i = e_{i,t} – e_{i,t-1} = NS_i + IM_i + RS_i$$

References

Stimson, Robert J., Roger R. Stough, and Brian H. Roberts. Regional economic development: analysis and planning strategy. Springer Science & Business Media, 2006.