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APPENDIX D. SHIFT-SHARE ANALYSIS<br />

Shift-share analysis is one way to account for the competitiveness <strong>of</strong> a region’s<br />

industries and to analyze the potential contribution to its future economic base.<br />

This analysis is utilized to identify employment changes in various business<br />

sectors over a specific period <strong>of</strong> time. Shift-share indic<strong>at</strong>es thre<strong>at</strong>s and<br />

opportunities based on regional, st<strong>at</strong>e, and industrial influences.<br />

Shift-share analysis breaks down employment growth (or decline) in a region over<br />

a given time period into three components: (1) a n<strong>at</strong>ional growth effect, which<br />

assumes the growth (or loss) <strong>of</strong> employment in a region mirrors the n<strong>at</strong>ional<br />

trend, (2) an industry mix effect, which is the amount <strong>of</strong> change in employment<br />

the region would have experienced had each <strong>of</strong> its industries grown <strong>at</strong> their<br />

n<strong>at</strong>ional r<strong>at</strong>es, less the n<strong>at</strong>ional growth effect, and (3) a competitive effect, which<br />

is the difference between the actual change in employment and the employment<br />

change to be expected if each industrial sector grew <strong>at</strong> the n<strong>at</strong>ional r<strong>at</strong>e and<br />

thus determines the regional effect <strong>of</strong> industry employment. <strong>The</strong> sum <strong>of</strong> these<br />

three effects equals the actual change in total employment within a region over a<br />

prescribed time period. When these sums are plotted on a graph with XY<br />

coordin<strong>at</strong>es, specific definitions th<strong>at</strong> balance local trends against n<strong>at</strong>ional trends<br />

can be applied to describe each industry’s current st<strong>at</strong>us, Figure D.1.<br />

Figure D.1. Definitions Used in Shift-Share Analysis<br />

CHALLENGE<br />

(-) N<strong>at</strong>ional Trends<br />

CLUSTER is:<br />

- Lagging n<strong>at</strong>ionally<br />

- Leading locally<br />

CLUSTER is:<br />

- Lagging n<strong>at</strong>ionally<br />

- Lagging locally<br />

LIMITATION<br />

(+)<br />

Local Trends<br />

(-)<br />

ASSET<br />

CLUSTER is:<br />

- Leading n<strong>at</strong>ionally<br />

- Leading locally<br />

CLUSTER is:<br />

- Leading n<strong>at</strong>ionally<br />

- Lagging locally<br />

PROSPECT<br />

(+)<br />

ASSET – regional<br />

sector growth is faster<br />

than overall n<strong>at</strong>ional<br />

employment growth;<br />

n<strong>at</strong>ional sector growth<br />

is faster than overall<br />

n<strong>at</strong>ional growth (fast<br />

regional growth in a<br />

quickly growing sector)<br />

PROSPECT – regional<br />

sector growth is slower<br />

than overall n<strong>at</strong>ionwide<br />

employment growth;<br />

regional sector growth<br />

is faster than overall<br />

regional growth (slow<br />

regional growth in a<br />

quickly growing sector)<br />

CHALLENGE – regional sector growth is faster than overall n<strong>at</strong>ional employment;<br />

n<strong>at</strong>ional sector growth is slower than overall n<strong>at</strong>ional growth (fast regional<br />

growth in a regionally declining or lagging sector)<br />

LIMITATION – regional sector growth is slower than overall n<strong>at</strong>ionwide<br />

employment growth; n<strong>at</strong>ional sector growth is slower than overall n<strong>at</strong>ional growth<br />

(slow regional growth in a n<strong>at</strong>ionally declining or lagging sector)<br />

ix.

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