Productivity Change in Manufacturing Regions: A Multifactor/Shift‐Share Approach

ABSTRACT The traditional shift‐share model measures the combined effects of output growth and productivity change on employment. A region with above average employment growth either has a favorable industry mix or enjoys a competitive advantage over other regions. To separate the effects of output and productivity, the shift‐share model is extended to decompose the effects of changes in output and productivity on employment. This paper modifies the Rigby‐Anderson extension by separating the contribution of labor and capital to productivity growth in the analysis of regional economic performance, and investigates twenty (two‐digit SIC) manufacturing sectors in twelve states (six snowbelt, six sunbelt states) to assess whether observed changes in employment were due to changes in output or to productivity.

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