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Location Quotion
Location Quotion
Economic Based Theory Location-Quotient Analysis and Porters Cluster Identification Chart
Introduction:
Location-Quotient (LQ) is a method to analyse a regions economic condition. The main functions are: i. to identify the main (specialized/core/basic) economic sectors of a region, ii. to evaluate condition of each economic sector (Strong & Growing, Weak & Growing, Strong but Declining, or Weak and Declining) iii. to evaluate the impact of new investment or development.
Definition:
LQ is the ratio of an industry share of local economy, compared to a larger region (referenced region) economy. Ex. A state economy compared to its nation/contry (referenced) economy.
Location-Quotients Formula
WNSR
Employment Number (000') District i State j Economic Sector 2000 2010 2000 2010 Services 24 29 84 100 Manufacturing 30 47 102 125 Mining 9 7 52 52 Forestry 6 17 40 81 Total Employment 69 101 278 357
Location-Quotients Formula
i.
Determine core (basic) and supporting (non-basic) economic sector for District i in year 2010.
Answer Qi:
Services and Manufacturing with LQ value more than 1.00 are the Basic or Core Economic sectors for District i with export based, while Mining and Forestry are both Non-Basic.
ii. Analyze the condition of each economic sector, whether growing or declining in year 2010.
LQ Changes
0.25 0.20
Manufacturing
Forestry
0.00
0.50
-0.05 -0.10
1.00
1.50
2.00
LQ
Mining
Services
Manufacturing
Forestry
0.15
0.10 0.05 0.00
0.00
0.50
-0.05 -0.10
1.00
1.50
2.00
LQ
Mining
Services
iii. Calculate the based multiplier for District i in 2010 and what is the effect if there are new investments that create 10 (000) new employment in service sector in year 2010?
Book Wang, X. & Hofe, R.V. ,(2007) Research Methods in Urban and Regional Planning. Springer Berlin Heidelberg, New York. ISBN 978-3-540-49657-1. Article S.Deller. (2010) Location-Quotients and TRED. University of Wisconsin. Obtain from http://nercrd/psu.edu/TRED/index.html on April 2012. Excel Maria Langer (1999) Excel 2000 for Windows; Visual Quick Start Guide, Peachpit Press (HF 5548.4 M523 L36 1999 c.1) 15 Palani Murugappan (2002) EXCEL; Functions for the daily serve, Venton publishing (HF 5548.4. M523 P36 2002 c.1)
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When LQ = 1 (Self-Sufficiency) the local economy is the same as the share of that industry in the national economy --In this situation, a given industrys share of. --Local production is assumed to be just sufficient to meet local demand, so all of the employment in this industry is considered Non-Basic. When LQ < 1 (Net Imports) --In this situation, a given industrys share of the local economy is less than the share of that industry in the national economy. --Local production is assumed to be insufficient to meet local demand, so all of this employment is considered Non-Basic. When LQ > 1 (Net Exports) --In this situation, a given industrys share of the local economy is greater than the share of that industry in the national economy. --Local employment is concentrated in these industries (relative to the nation) and is therefore assumed to exceed local demand and any excess production is exported. --With an LQ > 1, that proportion of the industry that accounts for this excess production is considered Basic Employment.