Shift-share analysis decomposes regional economic growth into three components: national growth, industrial mix, and regional competitiveness. It divides growth between the national growth rate, differences due to the region's initial industry composition, and factors like infrastructure that attract industries. While the data is generally available, identifying the appropriate industry level and determining the causes of competitive differences can be challenging, as local industries may differ and past performance does not guarantee future growth.

1. How to Analyze Changes
in Local Industries
Shift-Share Analysis

2. Shift Share Analysis
• Thinking about local growth
– US growing  we should grow…
– Wilmington:
• Strong in L&H
• Weak in manufacturing
• Wont grow the same as US…
– But people moving to town…
• Decompose growth to identify patterns
• Roughly:
– Local = National + Industry diff. + Diff.
Regional Rate

3. Shift-and-Share Analysis
• Shift and Share Analysis
– Divides growth into three
components
• National growth component – growth at
national rate
– If region grows at national rate, maintains its
“share”
• Mix component – growth difference owing
to differences in initial employment mix
• Competitive component – differences due
to local environment, i.e. permitting,
infrastructure, etc.
– Industry “shifting” to new region

4. Shift and Share
For a single industry

7. Shift and Share
Example…

10. Shift-Share Critique
• Data fairly available
• But:
– Local industry may differ from
national even for a specific sector
• Maybe the national level isn’t right
benchmark
– Difficult to select appropriate
industry level
• All manufacturing or a specific type…
–i.e. all food processing or only smoked
fish
–If one plant is industry  local = national

11. Shift-Share Critique
• Data fairly available
• But:
– Competitive component can change
quickly
– Past performance may not match future
• Difficult to identify cause (regulations,
infrastructure, employee at firm, etc.)