Shift-share analysis

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Shift/share analysis is a technique sometimes used for retrospectively decomposing changes, usually in employment, in a set of urban areas or regions. Regional scientists widely use the technique to examine the sources of employment growth or decline.

We have a study area in which employment and population are growing (or declining; the technique works the same way in either case and it saves words to make the growth assumption.) Total employment in our area is e, and that in the ith activity is ei . We have a larger frame reference area, usually the nation, where total employment is E, and that in the ith activity is Ei . The shift-share model says that growth in the study area’s ith activity employment is a function of:

  • The study area’s share of national (or regional) growth.
  • The mix change in activities.
  • And the shift change of activities toward the study area.

This says that change in employment in the study area’s ith activity from time t to time t+n can be measured:

e_i^{t + n} - e_i^t = share\;change + mix\;change + shift\;change

or

e_i^{t + n} - e_i^t = e_i^t \left[ {{{E_{}^{t + n} } \over {E_{}^t }} - 1} \right] + e_i^t \left[ {{{E_i^{t + n} } \over {E_i^t }} - {{E^{t + n} } \over {E^t }}} \right] + e_i^t \left[ {{{e_i^{t + n} } \over {e_i^t }} - {{E_i^{t + n} } \over {E_i^t }}} \right]

As this brief discussion suggests, shift-share analysis may be viewed as adding explicit considerations to economic base analysis. Economic base analysis asks how an area shares in national growth. Shift-share goes on to look at the changing mix of activities and at whether activities are shifting toward or away from the study area.