Making important business decisions requires access to valuable and insightful data that can make the whole process of decision-making more manageable and effective.
For example, shift-share analysis can equip businesses in different industries with the necessary data to make business moves the companies will benefit from in a particular region. With shift-share analysis and shared decision-making, only the sky’s the limit.
This post focuses on delivering all the essential information concerning shift-share analysis and shared decision-making. From defining these terms to explaining their critical components, you can find all the information necessary to get started.
Let’s jump straight into it.
What are shift-share analysis and shared decision-making?
A shift-share analysis is often used in the economy to describe which industries or professions are competitive in a specific region.
Namely, a shift-share analysis focuses on examining the national growth of a particular job or industry. Then, it calculates the likely amount of development in the desired region. Ultimately, the shift-share analysis compares the estimation with the actual results to help make better decisions in the future.
Although it’s impossible to provide the shared decision-making definition, it’s a concept closely related to shift-share. When companies want to implement the shift-share analysis into their decision-making process, it’s vital to understand this activity becomes shared.
By comparing the national and regional industry or occupation growth levels, businesses need to implement shared decision-making practices to come up with the ultimate solutions. That means companies must evaluate both national and regional growth levels to receive the most optimal results.
Therefore, they can use the shift-share analysis and shared decision-making to determine the amount of regional and national economic growth resulting from specific trends or unique growth factors. Simply
put, the role of these activities is to explain and find reasons why regional conditions differ from national trends.
The four components of shift-share
The shift-share analysis contains four essential components: industrial mix effect, national growth effect, expected change, and regional competitive effect. Here, we’ll take a closer look at each of them.
1. Industrial mix effect
The industrial mix effect focuses on determining the number of added and lost jobs within a particular industry on a regional level. This component uses the industry’s national growth or decline to find accurate answers.
If the jobs or industry is declining on a national level, it’s only understandable the same thing will happen in smaller regions, only on a smaller scale.
So, the industrial mix effect aims to calculate the growth or decline within an industry by looking at the situation at the national level and applying the same conditions to a specific regional level.
2. National growth effect
The national growth effect focuses on showcasing the number of jobs expected to come or go within an industry.
It focuses on measuring the national job growth of an industry to make accurate calculations.
So, if the national job situation of a particular industry is growing, the same effects can be expected across most regions in the country.
However, if the national net job is declining, so are the jobs in most smaller areas.
3. Expected change
The expected change measures the expected or presumed job growth or decline in a particular industry. It does so by combining the results of the two previously mentioned components.
Therefore, the industrial mix effect and the national growth effect determine the expected change in a specific regional industry.
4. Competitive effect
Finally, the competitive effect component of shift-share analysis measures the unique advantages within a particular region that might have influenced job changes in a specific industry or field.
While the national growth effect and the industrial mix effect focus on broader economic trends, it’s impossible to use these components to measure or define unique changes in the regional industry.
Fortunately, that’s what the competitive effect is for. This component can help companies examine more specific features that they can’t measure with broader industry trends.
A step-by-step guide to conducting a shift-share analysis
Let us guide you through conducting a shift-share analysis now that you know everything about it and the shared decision-making definition.
While this process is different for every company and industry, we will equip you with the general guidelines that will help you quickly and easily conduct a shift-share analysis. These are the steps you should take:
- Determine the time frame and the local area you’d like to analyze.
- Calculate the national growth share. You can do that by using the national growth rate data on the regional industry category.
- Calculate the industry mix effect. You can do that by comparing the overall national growth rate to the national growth rate of a specific industry.
- Calculate the regional shift effect. You can do that by comparing the national growth rate of a particular industry to its regional or local growth rate.
The shift-share analysis and shared decision-making can help you with the complex decision-making processes you’ve undoubtedly already experienced with your company.
So, implement the four critical components of the shift-share analysis to determine a specific industry’s regional growth or decline. You will develop a winning shift-share strategy that will help you gain insight into the current national industry trends and some unique regional features in your field.