Dynamic Shift-Share Analysis

ABSTRACT Most applications of shift‐share analysis to regional employment change have used a study period of several years and have examined conditions only at the beginning and end years. This comparative static approach does not take into account the continuous changes in both industrial mix and size of total employment of the region over the study period. Calculating the national growth effect, the industrial mix effect, and the competitive effect on an annual basis and then summing the results over the study period provides a more accurate allocation of job changes among the three shift‐share effects. This approach, which we term dynamic shift‐share analysis, also allows unusual years and years of economic transition to he identified. We illustrate the use of dynamic shift‐share by presenting results of an analysis of New England employment growth from 1939 to 1984, using U.S. Bureau of Labor Statistics data. The use of the dynamic form of shift‐share is important when the study period is characterized by either large changes in regional industrial mix or major differences between regional and national growth rates.