Shift‐Share Analysis: The International Dimension

Abstract

Abstract This paper extends the traditional shift‐share model to incorporate international effects. While some industries compete nationally for markets, other compete internationally. For industries competing nationally, regional growth derives from regional superiority relative to the national economy. For those competing internationally, regional growth is tied to regional advantages from specialization and competitive advantage relative to the international economy. Building on the Esteban ‐ Marquillas concept of homothetic employment, the international shift‐share model identifies regional growth due to regional and national competitive advantage and regional and national specialization. We demonstrate that the international model retains the property of region to region additivity.