Shift Share Analysis (SSA) is a tool used to determine the proportion of regional growth (or decline) that can be attributed to National, industry wide, and regional factors. This type of analysis can be applied to any economic variable that changes over time including employment and GDP.
SSA decomposes change over time into portions attributed to national growth, industry growth, and regional growth. By accounting for national and industry growth, the proportion of change attributed to regional, or competitive effects can be isolated. The regional growth effect is the most important piece, as it indicates if a region has unique competitive factors that allow an industry to thrive in a specific location.
A breakdown of SSA for employment is given below:
- National Effect: What a region is expected to gain or lose based on National trends:
- Nat’l Growth rate * regional industry jobs = Nat’l Effect
- Industry (Mixed) Effect: The change we would expect to see in a given industry in a region, based on the industry’s national growth/decline:
- (industry growth rate – nat’l growth rate) * regional industry jobs = Industry Effect
- Expected Change: Expected change is the amount of growth or decline that we would expect to see for a particular regional industry based on the national growth effect and the industry effect:
- Industry Effect + National Effect = Expected Change
- Regional (Competitive) Effect: The regional effect indicates how much of the change within a given region is the result of some unique competitive advantage of the region rather than the result of broader trends.
- Actual Change – Expected Change = Regional Effect