Sunday, October 3, 2010

Location Quotient Calculation

To calculate any location quotient the following formula is applied. Note that in this formula we are comparing the Regional Economy (often a county) to the National Economy. Location quotients may also be calculated that compare the county to a state.
Location Quotient=
Regional Employment in
Industry I in Year T
/
National Employment in
Industry I in Year T
Total Regional Employment
 in Year T
Total National Employment
in Year T
Examining this formula more closely, we see that to allocate employment to the basic and non-basic sectors, location quotients are calculated for each industry. Simply stated, the location quotient method compares Local Employment to National Employment. The LQ provides evidence for the existence of basic employment in a given industry.

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