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LOCATION
QUOTIENT EXAMPLE: KING COUNTY AND THE STATE OF WASHINGTON
Using the following
statistics we can calculate a location quotient for King
County for Manufacturing of Transportation Equipment (SIC
Code 37) by comparing it to the State of Washington's
figures. We can then estimate the number of Basic sector
jobs if the LQ is greater than 1.0.
Table 1:
Total and Industry Employment, King County and Washington
State, 1994
|
Employment
in Industry I
|
Total Employment
|
King County
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53,000
|
729,341
|
WA State
|
84,955
|
1,773,259
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Table 2: Calculation of Location Quotient for
Transportation Equipment
LQ
Part I=
|
Region
Industry
|
=
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53,000
|
= 0.072668
|
Region Total
|
729,341
|
LQ
Part II=
|
State
Industry
|
=
|
84,955
|
= 0.047909
|
State Total
|
1,773,259
|
LQ
Part III=
|
Region
Ratio
|
=
|
0.072668
|
= 1.516800
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State Ratio
|
0.047909
|
So the Location
Quotient for Industry Code 37 (Transportation Equipment)
has been calculated to be greater than 1.0. There is
evidence that some of this employment is Basic sector
because this industry appears to be exporting much of its
goods to non-local markets (a Boeing-related effect no
doubt!). How many of these 53,000 jobs are Basic in
nature? To determine this we need to apply our Basic
Sector Employment formula.
Basic
Employment
Part I=
|
Region
Industry Employment
|
=
|
53,000
|
= 0.62386
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State Industry
Employment
|
84,955
|
Basic
Employment
Part II=
|
Region
Total Emp
|
=
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729,341
|
= 0.41130
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State Total Emp
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1,773,259
|
Basic
Employment
Part III=
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State
Employment
Industry I
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=
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84,955
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Using the above
portions of the formula we can now calculate the number
of Basic sector jobs from this specific industry:
Basic Sector Jobs =
(0.62386 - 0.41130) X 84,955 = 18,058
If, instead of using
the State as our comparison area we used the United
States as our reference region, how do you think our
results would differ? Would the location quotient go up
or down? Why? Would the number of Basic sector jobs go up
or down? Why? For an answer to these questions go to the King County-US LQ
Page.
Industry Code
37 (Transportation Equipment Manufacturing) has a
Location Quotient of 1.5168 which is greater than
1.0.
Therefore,
this industry exports many of its goods to
non-local markets.
Of the 53,000
Transportation Equipment Manufacturing jobs,
18,058 are Basic Sector jobs.
Do these
findings seem reasonable?
What of the
conclusion that "only" 18,058 of the
53,000 Transportation Equipment Manufacturing
jobs are Basic sector? Doesn't Boeing seem to
export almost all of its goods and services to
non-local areas? Does this still make sense?
What
limitations does this suggest for the Location
Quotient Technique?
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