Location Quotient
Introduction
The Location Quotient (LQ) is a statistical measure, used in the fields of economic geography and regional science, to assess the concentration of a particular industry, cluster, occupation, or demographic group in a region as compared to the nation. It is a ratio that measures a region's industrial specialization relative to a larger geographic unit (usually the nation).
Concept and Calculation
The Location Quotient is a simple ratio that provides a measure of relative concentration. It is calculated by dividing the proportion of the local economy (city, state, or region) involved in a particular industry by the proportion of the national economy involved in that same industry.
The formula for calculating the Location Quotient is as follows:
LQ = (Employment in Industry X in Region A / Total Employment in Region A) / (Employment in Industry X in Nation / Total Employment in Nation)
If the LQ is greater than 1, it indicates that the industry has a greater share of the local economy than of the national economy. An LQ less than 1 indicates the opposite.
Interpretation and Usage
The Location Quotient is a valuable tool for regional economic analysis, particularly in identifying specialization. It can be used to identify the industries that are a particular strength in a region. For example, an LQ greater than 1 indicates that the region has a comparative advantage in the specified industry.
However, it is important to note that a high LQ does not necessarily indicate a large industry, but rather a larger share of the local economy compared to the national economy. Similarly, a low LQ does not necessarily indicate a small industry, but rather a smaller share of the local economy compared to the national economy.
Limitations
While the Location Quotient is a useful tool, it has its limitations. It is a static measure that does not account for changes over time. It also does not account for the size of the industry or the size of the economy. Furthermore, it does not indicate whether an industry is export-oriented or serves the local market.
Conclusion
Despite its limitations, the Location Quotient is a valuable tool in economic geography and regional science. It provides a simple, straightforward way to measure industrial specialization and can help identify regional strengths and weaknesses.