Shift-Share Analysis

Shift-share analysis is a method of analysing regional growth, a technique that compares regional growth with growth at the state (or national) level. Perennial Economics uses this approach to help provide insights into regional structural change. The method seeks to attribute changes in the regional economy to various components, namely:

• share (or state growth) component
• proportionality shift (or industry mix) component
• differential shift (or regional) component

Share (or state growth) component

Indicates the extent to which growth in the state economy has influenced growth at the regional level. This component shows the amount by which growth in the region would have been if it grew at precisely the same rate as the state as a whole.

Proportionality shift (or industry-mix) component

Arises from the fact that some sectors, at a state level, grow more quickly than others. Thus a region that specialises in ‘slow-growth’ sectors is likely to show a net downward proportionality shift. Conversely, a region favoured by a high proportion of ‘rapid-growth’ sectors will, most likely, show a positive proportionality shift.

Differential shift (or regional) component

Regions that have positive differential effects will have locational advantages for particular activities that have improved relative to other regions. Sectors at the regional level do not necessarily grow (or decline) at the same rate as the same sector at the state level due to circumstances which provide regional comparative advantage (or disadvantage).