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Shift-Share Analysis: Determine the Competitiveness of an Industry

Shift-Share Analysis
Andrius Ziuznys

Andrius Ziuznys

December 23, 2021

What is shift-share?

Shift-share indicates the employment growth and competitiveness of an industry in a certain region. It also shows the national growth of an industry and can be used to calculate the growth in a particular region. 

The shift-share analysis helps you determine if a specific regional industry showed faster or slower growth in comparison with the national economy. Shift-share analysis allows to see the differences between local and national economies.

For instance, you can identify whether a local economy showed faster signs of growth than the larger economy. Alternatively, you can compare the national economy to the regional or local economy. Employment growth, as one example, is a significant identifier of an industry's success. The shift-share analysis helps you identify those successful industries.

Shift-share analysis for investment intelligence

Shift-share can be widely used as a tool for better investment intelligence. Since it allows you to calculate the competitiveness of an industry in specific regions, you can filter the relevant industries and regions and focus your attention exactly where it should be.

For example, if the growth of the industry in one region was almost identical to the national growth, it indicates that the industry was not really exceptionally competitive. It grew, but only because the industry grew everywhere else.

Imagine a huge field of flowers. Under identical circumstances, they all either blossom or perish at nearly the same rate. However, some of them might be planted in more fertile soil. Or perhaps some gained more sunlight than others. Maybe a portion was affected by some unexpected events and got damaged beyond recovery. Environmental circumstances tend to give competitive advantages or disadvantages. 

Identifying the ones that show the most potential in a field of generic growth is what you need to do as an investor. However, it's not that easy to do if you're going in blind. Having the data and executing a shift-share analysis gives you the sight that you need to be able to find what you're looking for.

The shift-share analysis focuses and derives results from two sides of growth: national and regional.

Going further, we will discuss all you need to know about shift-share analysis, its benefits, and its applications.

Shift-share: the national level

The national side is used as a fundamental base for comparisons to derive the growth rates of local economies.

National economy

The national economy encompasses the economical growth or decline rates of the entire nation. The national average of national employment change can be used as a benchmark to identify the pace of the local employment growth.

National trends

National trends cover the overall national economic trends that can be compared to regional trends in order to draw specific conclusions about the local industries' performance. It allows to see how well a local industry is doing compared to national levels of growth.

Shift-share: the regional level

The regional side is used to compare it to national levels and see whether there is a competitive advantage of a region that allows for better regional industry prosperity than the national growth rate.

Regional economy

The regional economy focuses on the economic features of a specific region. You can calculate the regional shift by multiplying the local employment in a particular industry by the percentage change in the growth of that industry nationally and regionally.

Regional trends

Regional trends cover the economic trends of an industry on the local level. If the local industry is outperforming the national numbers, it indicates the competitive advantage of a region and then the regional trends can be analyzed to find the specific factors contributing to the competitive edge.

Tesla's statistics

Components of shift-share analysis

The shift-share analysis consists of four main parts: national growth effect, industrial mix effect, expected change, and competitive effect.

Each of them will be discussed in greater detail below.

National growth effect

The national growth part helps you visualize the national trend. It determines the change of growth in a specific region in comparison with the nation-wide growth numbers. Let's say the national US economy showed a 5% YoY growth. Consequently, the specific region should grow at the same rate. The national growth component is the base for all further calculations.

Industrial mix effect

An industrial mix effect is an approach that helps you see which industries outgrew the overall national economy average and which industries lagged behind. Some industries grow faster than others and the industrial mix effect allows you to identify those industries. 

You can calculate the industrial mix effect by multiplying the base year employment by the difference between the national growth rate for that specific sector and the overall national average rate.

For example, let's say that the national growth rate of a selected industry is 7%. The national economic growth is 5%. Subtracting the particular industry growth rate from the national levels equals 2%. It means that 2% of the growth can be attributed to the industry growth alone, aside from the national growth rate. As a result, the industrial mix effect is equal to 2%.

Expected change

The expected change is the rate of growth you expect to see for a specific industry based on the national growth effect and the industry mix effect discussed earlier. Any changes beyond those calculations are considered unexpected. Unexpected changes are allocated to the specific region's competitive effect which will be explained next. To calculate expected change, you need to combine national growth with the industrial mix effect. Referring to the examples and numbers above, the computation is as follows: 5%+2%=7%. The expected change, therefore, is 7%.

Competitive effect

Some regions have unique competitive advantages that allow the industry to outperform national economic growth trends. It shows that there are certain unique circumstances about that specific region that allows for a competitive advantage in the industry. The competitive effect refers to the unique circumstances around those changes. Regional competitive effects can be impacted by geographical and demographical factors, among others.

For example, let's say that the national economic growth rate is 5%. The national industry growth rate is 11%. After applying the deduction, you can see that 6% of the growth is assigned exclusively to the industry. At this point, you have the national level of growth and can move on to the regional economy. If you take the same industry and check its growth in a certain local economy, you may find that the industry there grew at a rate of 15%. You do the math, deduct the 5% growth of the overall national economic growth, and you see that the growth of the industry in the selected region is 10%. It's 4% higher than the national industry growth. Now you can draw a conclusion that the specific region provides a positive competitive effect for that particular industry.

There are two types of regional industries: leading and lagging. Leading industries are those that outperform the national industry growth metrics. In contrast, lagging industries are those that underperform.

The key takeaway here is that identifying industries that have a competitive advantage in certain regions could help investors recognize specific factors that could affect their chances of success. Furthermore, diversifying your investments in leading industries is a better business decision, and shift-share analysis allows you to do that. However, you may want to jumpstart economic development in an underperforming region, and shift-share analysis also allows you to identify a lagging regional industry.

How to use shift-share analysis

First of all, shift-share analysis shows the distinctiveness of a regional economy. However, it only highlights the changes in terms of job growth and not the total number of jobs in the whole industry. The share-shift analysis is useful to identify a specific region's competitive industries and note the competitive advantages.

Secondly, it's important to note that shift-share analysis does not tell you the reasons why those specific industries are competitive. It only shows the industry growth rate based on national trends. For further analysis about the reasons for competitiveness, analysts should be involved who know the unique circumstances of that specific region.

You can use shift-share analysis to avoid misinterpretations and see things how they really are. For example, just because an industry is performing very well and is way ahead of every other industry, that does not necessarily mean that it's outperforming national metrics. The national industry growth rate could be substantially higher, resulting in the thriving regional industry actually falling behind the trends. The shift-share analysis is capable of revealing the industry's true colors in terms of growth and employment change.

In contrast, one industry could be slowly declining in a particular region. However, the national economic levels in that particular industry could be declining substantially faster. As a result, the declining regional industry is outperforming the national levels and more effectively preventing job loss.

On the other hand, one industry could be growing nationally while the regional industry crumbles down. That is a clear indication of a severe regional disadvantage and should be examined further to find necessary solutions.

percentage rise and fall

Data for shift-share analysis

In order to implement shift-share analysis, you first need to get your hands on relevant data. For this type of analysis, annual employment data is required which you can access online through government resources. The data is publicly available and ready to analyze. However, the one downside is collecting it. Gathering data manually takes quite the amount of time that could instead be used to perform analysis.

To prevent the time lost on collecting relevant data, you could confide in a public web data provider such as Coresignal. With our firmographic data, you can group businesses by unique identifiers such as size, industry, location, and more. Also, with our employee headcount dataset, you can conveniently track the changes in employment. You can find companies and industries that interest you and receive the data quickly and conveniently. The data is constantly updated; therefore, it's always fresh, relevant, and accurate.

Once you have the data, you can proceed to perform the shift-share analysis and gather the insights that are most relevant and needed to you.


The shift-share analysis allows you to gain deeper insights into the local economy and perform regional analysis. You can calculate the regional growth or decline to see whether the industry outperformed national metrics. You can track economic change and industry trends to improve your knowledge and make informed decisions.

The shift-share analysis is an extremely useful tool for investors, economists, and other analysts that require comparative knowledge for research or to make business decisions.

Frequently asked questions

What is shift-share analysis?

Shift-share analysis refers to the employment growth, decline, and competitiveness in a particular industry and region.

What is shift-share analysis used for?

The shift-share analysis was developed to determine how part of regional economic growth is related to the industry, national, or regional factors.

What data do you need for shift-share analysis?

The most important data for an accurate shift-share analysis is employment count data to determine growth or decline in a specific industry and region.

What are the components of shift-share analysis?

The main components are the national growth effect, industrial mix effect, expected change, and regional competitive effect.

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