1

45th Congress of the European Regional Science Association


Spatial shift-share analysis: new developments and some
findings for the Spanish case



Matías Mayor Fernández; mmayorf@uniovi.es; Tel. 985105051; Fax: 985105050
Ana Jesús López Menéndez; anaj@uniovi.es; Tel. 985103759; Fax: 985105050
Department of Applied Economics
University of Oviedo (Spain)



Abstract

According to Dunn (1960) the main feature of shift-share analysis is the computation of
geographical shifts in economic activity. Nevertheless, the traditional shift-share
analysis assumes a specific region to be independent with respect to the others and
therefore this approach does not explicitly include spatial interaction.
Some authors such as Hewings (1976) and Nazara and Hewings (2004) recognized the
convenience of considering spatial dependence between spatial units by means of the
definition of a spatial weights matrix.
In this paper an analysis of these models is carried out, leading to a more realistic
approach to the evolution of employment. An empirical application is also presented
summarizing the main findings for the Spanish case.

Keywords: Shift-share analysis, spatial dependence, employment, EPA.
JEL Codes: R11, R15



2
Spatial shift-share analysis: new developments and some
findings for the Spanish case



Matías Mayor Fernández; mmayorf@uniovi.es
Ana Jesús López Menéndez; anaj@uniovi.es
Department of Applied Economics
University of Oviedo (Spain)


1. Introduction
Shift-share analysis is a statistical tool allowing the study of regional development by
means of the identification of two types of factors. The first group of factors operates in
a more or less uniform way throughout the territory under review, although the
magnitude of its impact on the different regions varies with its productive structure. The
second type of factors has a more specific character and operates at the regional level.
Although according to Dunn (1960) the main objective of the shift-share technique is
the quantification of geographical changes, the existence of spatial dependence and/or
heterogeneity has barely been considered.
The classical shift-share approach analyses the evolution of an economic magnitude
between two periods identifying three components: a national effect, a sectoral effect
and a competitive effect. However, this methodology focuses on the dependence of the
considered regions with respect to national evolution but it does not take into account
the interrelation between geographical units.
The need to include the spatial interaction has been recognized by Hewings (1976) in
his revision of shift-share models. In the classical formulation this spatial influence is
gathered in a certain way, since the local predictions should converge to the national
aggregate. Nevertheless, at the same time the estimation of the magnitude of the sector i
in the region j is supposed to be independent of the growth of the same sector in another
region k, an assumption which would only make sense in the case of a self-sufficient
economy.



3
The increasing availability of data together with the development of spatial econometric
techniques allow the incorporation of spatial effects in shift-share analysis.
The estimation of spatial dependence is needed for both the identification of the effects
and the computation of forecasts. The aim is to obtain a competitive effect without
spatial influence, allowing the distinction between a common pattern in the
neighbouring regions and an individual pattern of the specific considered region.
This paper starts with a brief exposition of the classical shift-share identity, also
describing the introduction of spatial dependence structures through spatial weights
matrices.
In the third section some models of spatial dependence are presented including the
approach of Nazara and Hewings (2004) and some new proposals. An application of
these models to Spanish employment is presented in section four and the paper ends
with some concluding remarks summarized in section five.

2. Shift-share analysis and spatial dependence
The introduction of spatial dependence in a shift-share model can be carried out by two
alternative methods. The first one, which is the aim of this paper, is based on the
modification of the classical identities of deterministic shift-share analysis by adding
some new extensions.
The second is based on a regression model (stochastic shift-share analysis) and the
inclusion of spatial substantive and/or residual dependence.
According to Isard (1960), any spatial unit is affected by the positive and negative
effects transmitted from its neighbouring regions. This idea is also expressed by Nazara
and Hewings (2004), who assign great importance to spatial structure and its impact on
growth. As a consequence, the effects identified in the shift-share analysis are not
independent, since similarly structured regions can be considered in a sense to be
“neighbouring regions” of a specified one, thus exercising influence on the evolution of
its economic magnitudes.




4
2.1. Classical shift-share analysis
If we denote by
ij
X the initial value of the considered economic magnitude
corresponding to the i sector in the spatial unit j,
ij
X´ being the final value of the same
magnitude, then the change experienced by this variable can be expressed as follows:
( ) ( )
'
ij ij ij ij ij i ij ij i
X - X X X r X r - r X r - r = ∆ = + + (1.1)
S R
'
ij ij
i 1 j 1
S R
ij
i 1 j 1
(X X )
r
X
= =
= =

=
∑∑
∑∑

( )
R
'
ij ij
j 1
i R
ij
j 1
X X
r
X
=
=

=



'
ij ij
ij
ij
X X
r
X

=
The three terms of this identity correspond to the shift-share effects:
( )
( )
ij ij
ij ij i
ij ij ij i
National Effect EN X r
Sectoral or structural Effect ES X r r
Regional or competitive Effect ER X r r
=
= −
= −

As it can be appreciated, besides the national growth we should consider the positive or
negative contributions derived from each spatial environment, known as the net effect.
Thus the sectoral effect collects the positive or negative influence on the growth of the
specialization of the productive activity in sectors with growth rates over or under the
average, respectively. In turn, the competitive effect collects the special dynamism of a
sector in a region in comparison with the dynamism of the same sector at the national
level.
Once the regional and sectoral effects are calculated for each industry, their sum
provides a null result, a property which Loveridge and Selting (1998) call “zero national
deviation”.
The shift-share analysis has some limitations derived, in the first place, from an
arbitrary election of the weights, which are not updated with the changes of the
productive structure. Secondly, we need to notice that the results are sensitive to the
degree of sectoral aggregation and furthermore, the growth attributable to secondary
multipliers is assigned to the competitive effect when it should be collected by the
sectoral effect, resulting in the dependence of both effects.
Besides the previously described problems, Dinc et. al. (1998) emphasize the
complexity related to the increasing of the spatial dependences between the sectors and
the regions, which should be reflected in the model by means of the incorporation of
some term of spatial interaction.

5
A solution to the interdependence between the sectoral and regional components,
derived from the fact that both effects depend on the industrial structure, is given by
Esteban-Marquillas (1972) who introduced the idea of “homothetic change”. This
concept is defined as the value which would take the magnitude of sector i in region j ,
if the sectoral structure of that region is assumed to be coincident with the national one.
In this way, the homothetic change of sector i in region j is given by the expression:

R S
ij ij
S R
j 1 j 1 *
ij ij ij S R S R
i 1 j 1
ij ij
i 1 j 1 i 1 j 1
X X
X X X
X X
= =
= =
= = = =
= =
∑ ∑
∑ ∑
∑∑ ∑∑
(1.2)
leading to the following shift-share identity:
( ) ( ) ( ) ( )
ij ij ij i ij ij i ij ij ij i
X X r X r r X r r X X r r
∗ ∗
∆ = + − + − + − − (1.3)

The third element of the right hand side of the equation is known as the “net
competitive effect”, which measures the advantage or disadvantage of each sector in the
region with respect to the total. The part of growth not included in this effect when
ij ij
X X

≠ is called the “locational effect”, corresponding to the last term of identity (1.3)
and measuring the specialization degree.

An alternative approach is provided by Arcelus (1984), whose model includes a specific
regional effect (which is similar to the national effect in the classic identity) and a
sectoral regional effect, reflecting the amount of growth derived from the regional
industry-mix:

( )
ij ij j
ER X r r = − (1.4)

( ) ( )
ij ij ij j i
ESR X r r r r
(
= − − −
¸ ¸
(1.5)

It must be noted that these models include a comparison between region and nation but
nevertheless they still assume each specific region to be independent from the others
and therefore no spatial patterns are included.



6
2.2. The structure of spatial dependence: Spatial Weights
We need to develop a more complete version of shift share identity since each region
should not be considered as an independent reality. It must also be kept in mind that the
economic structure of each spatial unit will depend on some regions that are
“neighbouring regions” in some sense. A suitable approach is the definition of a spatial
weights matrix, thus solving the problems of multi-directionality of spatial dependence.
In this way, Tobler´s law of geography (1979) is assumed, establishing that any spatial
unit is related to any other, this relation being more intense when the considered units
are closer.
The concept of spatial autocorrelation attributed to Cliff and Ord (1973) has been the
object of different definitions and, in a generic sense, it implies the absence of
independence between the observations, showing the existence of a functional relation
between what happens at a spatial point and in the population as a whole.
The existence of spatial autocorrelation can be expressed as follows:

( ) ( ) ( ) ( )
j k j k j k
Cov X , X E X X E X E X 0 = − ≠ (1.6)
j
X
k
X being observations of the considered variables in units j and k, which could be
measured in latitude and length, surface or any spatial units. In the empirical application
included in this paper these spatial units are the European territorial units NUTS-III at
the Spanish level.
In general terms, given N regional observations it would be necessary to establish N
2

terms of covariance between the observations. Nevertheless, the symmetry allows the
reduction of this size to
N(N 1)
2

.
The spatial weights are collected in a squared, non-stochastic matrix whose elements w
jk

show the intensity of interdependence between the spatial units j and k.

12 1R
21 2R
R1 R2
0 w w
w 0 w
W
w w 0
⋅ (
(

(
=
( ⋅ ⋅ ⋅ ⋅
(

¸ ¸
(1.7)
According to Anselin (1988), these effects should be finite and non-negative and they
could be collected according to diverse options. A well-known alternative is the

7
Boolean matrix, based on the criterion of physical contiguity and initially proposed by
Moran (1948) and Geary (1954). These authors assume w
jk
=1 if j and k are
neighbouring units and w
jk
=0 in another case, the elements of the main diagonal of this
matrix being null.
In order to allow an easy interpretation, the weights are standardised so that they satisfy
the following conditions:
0≤w
jk
≤1
jk
k
w 1 =

for each row j
X WX =

According to the last condition, the value of a variable in a certain location can be
obtained as an average of the values in its neighbouring units.
Together with the advantages of simplicity and easy use, the considered matrix shows
some limitations, such as the non-inclusion of asymmetric relations, which is a
requirement included in the five principles established by Paelink and Klaasen (1979).
The consideration of different criteria for the development of the spatial weights matrix
can deeply affect the empirical results. Thus, the contiguity can be defined according to
a specific distance:
jk jk
w 1 d = ≤ δ
jk
d being d
jk
the distance between two spatial units
and δ the maximum distance allowed so that both be considered neighbouring units.
In a similar way the weights proposed by Cliff-Ord depend on the length of the common
border adjusted by the inverse distance between both locations:

jk
jk
jk
b
w
d
β
α
= (1.8)
jk
b being the proportion that the common border of j and k represents with respect to the
total j perimeter. From a more general perspective, weights should consider the
potential interaction between the units j and k and could be computed as:
jk
jk
1
w
d
α
= and
jk
d
jk
w e
−β
= .

8
In some cases the definition of weights is carried out according to the concept of
“economic distance” as defined by Case et al. (1993) with
jk
j k
1
w
X X
=

X
j
and X
k
being the per capita income or some related magnitude. Some other authors as López-
Bazo et al. (1999) propose the use of weights based on commercial relations.
The consideration of a binary matrix with weights based only on distance measures
guarantees exogeneity but it can also affect the empirical results as indicated by López-
Bazo, Vayá and Artís (2004). In this sense, it would be interesting to compare these
results with those related to some alternative weights defined as a function of the
economic variables of interest.
Some alternative definitions have been developed by Fingleton (2001), with
2 2
ij t 0 ij
w GDP d

=
= and Boarnet (1998), whose weights increase with the similarity
between the investigated regions.

j k
jk
j k
j
1
X X
w
1
X X

=


(1.9)
The matrix proposed by Molho (1995) focuses on the employment levels E
j
:

( )
( )
jk
jl
D
j
jk
D
l
l j
E e
w
E e
−η
−η

=

(1.10)
with
jj
w 0 = . This definition assumes that the spillover effect of a specific area is a
direct function on its size, measured as the number of employees, and an inverse
function of the distance between the considered areas, ηbeing a smoothing parameter.
Given the diversity of options for the specification of weights, Stetzer (1982) establishes
three basic ideas in the context of a space-temporary model: the existence of different
results depending on the considered weights, the risk of a wrong specification of spatial
weights and, finally, the need of a set of rules allowing the definition of suitable
weights.


9
3. Models of spatial dependence
In this section we present some proposals for the inclusion of the spatial structure in a
shift-share model, and analyse their suitability.
The extension of the shift-share model proposed by Nazara and Hewings (2004)
introduces the spatially modified growth rates according to the previously assigned
spatial weights:

( ) ( )
v v
ij ij ij ij
r r r r r r = + − + − (1.11)
where
v
ij
r is the rate of growth of the i sector in the neighbouring regions of a given
spatial unit j which can be obtained as follows:
t 1 t
jk ik jk ik
k v k v v
ij
t
jk ik
k v
w X w X
r
w X
+
∈ ∈

| |

|
\ .
=
∑ ∑

(1.12)
and the rate of growth of the total employment is also defined for each unit j as a
function of its neighbouring structure:

t 1 t
jk k jk k
k v k v v
j
t
jk k
k v
w X w X
r
w X
+
∈ ∈

| |

|
\ .
=
∑ ∑

(1.13)
It must be noted that the
jk
w elements correspond to the previously defined matrix of
standardized weights by rows. In any case, regional interactions are supposed to be
constant between the considered periods of time as is usually assumed in spatial
econometrics.
Three components are considered in expression(1.11), the first one corresponding to the
national effect, which is equivalent to the first effect of the classical (non spatial) shift-
share analysis.
In the second place, the sectoral effect or industry mix neighbouring regions-nation
effect shows a positive value when the evolution of the considered sector in the
neighbouring regions of j is higher than the average.
Finally, the third term is the competitive region-neighbouring regions effect and
compares the rate of growth in region j of a given sector i with the evolution of the

10
spatially modified sector. Thus, a negative value of this effect shows a regional
evolution that is worse than the one registered in the neighbouring regions, meaning that
region j fails to take advantage of the positive influence of its neighbouring regions.
A weakness can be found in the previously defined model, since a single spatial weight
matrix is considered for the computation of the different spatially modified rates of
sectoral and global growth. This assumption would not be so problematic if we used,
instead of endogenous matrices, the binary matrix, which would vary sensitively
depending on the sectoral or global adopted perspective.
On the other hand, the use of the same structure of weights in the initial and final
periods could be considered excessively simplistic, suggesting the need of developing
some dynamic version.

It is worth noting that in expressions (1.12) and (1.13) an average value is obtained of
the considered variable as a function of the values of its neighbouring regions. The
introduction of spatial dependence could be carried out more intuitively by considering
the variables in relative terms such as the growth rates and thus decomposing the
spatially modified rate of growth
( )
ij
Wr according to the following expression:
( ) ( )
ij i ij i
Wr r r r Wr r = + − + − (1.14)
As it can be seen only the sectoral-regional rate of growth is modified and therefore the
global and sectoral rates of growth are computed as an aggregation of the evolution
registered in sub-regional levels. This fact can be easily understood since the global and
sectoral rates of growth are the results of economic evolution including spatial
dependence.
Nevertheless another identity could be considered by defining rates of growth over the
spatially modified variables:

( ) ( )
v v v v
ij i ij i
Wr r r r Wr r = + − + − (1.15)

An alternative approach to what extent a spatial unit is being affected by the
neighbouring territories would consist in introducing homothetic effects analogous to

11
those defined by Esteban-Marquillas (1972) but referring to regional environment. In
this way, we would be able to define the value the magnitude of the sector i in the
region j would have taken if the sectoral structure of j were similar to its neighbouring
regions. More specifically, the homothetic change with respect to the neighbouring
regions would be given by the expression:

ik S
v k v
ij ik S
i 1
ik
i 1 k v
X
X X
X

=
= ∈
=


∑∑
(1.16)
A more complete option is based on the use of spatial weights matrix. In this case the
economic magnitude is defined in function of the neighbouring values, and therefore the
concept of homothetic employment would be substituted by spatially influenced
employment, which would be computed according to a certain structure of spatial
weights (W) and the employment effectively computed for each combination region-
sector. The identity would then be the following
( ) ( ) ( )( )
v* v*
ij ij ij i ij ij i ij ij ij i
X X r X r r X r r X X r r ∆ = + − + − + − − (1.17)
where the value of the magnitude in function of the neighbouring regions is obtained as:
v*
ij jk ik
k V
X w X

=

(1.18)
V being the set of neighbouring regions of j.
One of the drawbacks of this spatially influenced employment is related to the fact that,
as a consequence of the considered expression, it can be observed that:
v*
ij ij
i, j i, j
X X ≠
∑ ∑
.
This could introduce two kinds of doubts with respect to the utility of this definition: on
the one hand, the magnitudes of the effects for each sector-region are going to be in
some cases sensitively different to those obtained in the equivalent model of Esteban-
Marquillas (1972), leading to a more difficult interpretation and comparison of the
obtained results. On the other hand, as a result of the structure of the spatial weights, the
expected level of employment would be different to the effective one.


12
In order to try to solve both problems, an alternative interpretation of modified
employment is proposed based on a new spatially modified structure of sectoral weights
based on the spatially influenced employment (1.18):
R
v*
ij
v*
j 1
i
S R v*
v*
ij
i 1 j 1
X
X
X
X
=
= =
=

∑∑
, leading to the
values:

v*
v** i
ij j v*
X
X X
X
= (1.19)
It must be noticed that this new concept satisfies the identity
v**
ij ij
i, j i, j
X X =
∑ ∑
, although
substantial differences are found in the distribution of the variable for each combination
sector-spatial unit. The substitution of the expression (1.19) in (1.17) leads to the
identity:
( ) ( ) ( )( )
v** v**
ij ij i ij ij i ij ij ij i
X r X r r X r r X X r r + − + − + − − (1.20)

4. The property of additivity region-region
The study of spatial interrelations suggests the need of a prior exploratory analysis
allowing the detection of spatial autocorrelation. The objective is to analyse whether the
spatial structure of the investigated phenomenon is significant and can be easily
interpreted and also if it is possible to obtain any information referring to the process
generating this distribution in the space.
The detection of spatial autocorrelation can be carried out by means of diverse tests
such as those of Geary (1954) and Moran (1948). This last alternative will be used in
the empirical applications of this work and is based on the expression:

n n
ij i j
i 1 j1
n
2
0
i
i 1
w z z
n
I ; i j
S
z
= =
=
= ≠
∑∑

(1.21)
with
i i
z X X = − and
n n
0 ij
i 1 j 1
S w
= =
=
∑∑
.

13
With regard to the distribution used in the statistical tests, Cliff and Ord (1981) show
that if the sample size is sufficiently large, then the Moran test can be carried out from
an asymptotically normal distribution. For Upton and Fingleton (1985) this normality
depends on the number of considered links and the way in which they are connected,
that is, on the structure of the spatial weights matrix.
Once the presence of spatial autocorrelation is detected we should examine the
fulfilment of the additivity property in the extended models.
Haynes and Machunda (1987) analyse the problems related to the traditional extensions
of shift-share analysis with regard to this property of “additivity region-region” also
denoted “transformations invariance”. From an empirical point of view, the
independence of any decomposition of a magnitude with respect to the level of detail of
the considered data (including both sectoral and spatial perspectives) is desirable. The
following conditions are required for this decomposition:
• For a given sector, the sum of the shift-share components for all the spatial levels
included in a specific region j is equal to the corresponding component computed at
the j regional level.
• For a given region j, the shift-share component of a sector i is equal to the sum of
the respective components of all the sub-sectors including in sector i.
In the traditional version each of the components satisfies the first condition while the
second condition is verified only for the national effect.
Stokes (1974) shows that the competitive effect modified according to the Marquillas
criteria does not satisfy the property of additivity region-region and the following
expression holds:

( ) ( ) ( )
1 1 2 2
?
* * *
ijt 1 ij i ij t 1 ij i ij t 1 ij i
E r r E r r E r r
− − −
− = − + − (1.22)
It must be noted that the previous expression is not strictly correct since it does not keep
in mind that the growth rate of a region can be expressed as a function of the growth
rates of the spatial units included in it. In fact, it can be shown that if a region is divided
into its corresponding components, then its growth rate can be obtained as a weighted

14
average of the sub-regional growth rates, that is to say, given by
k
n
j
j jk
k 1
j
X
r r
X
=
=

, where k
denotes the spatial units included in region j.
Haynes and Machunda (1987) consider that the analysis of Stokes (1974) of the
property of additivity region to region is wrong since it does not include the former
reasoning about the rates of regional growth. In the empirical application included in the
next paragraph we analyse the fulfilment of this property for each sector, so that the sum
of the competitive effect for the considered regions is
( )
v
ij ij ij
j
X r r 0 − =

in (1.11) or
( ) ( )( ) ( )
v* v*
ij ij i ij ij ij i
j 1
X r r X X r r 0
=
− + − − =

in (1.17) .

5. Some findings for the Spanish case
The previously described developments can be applied to the Spanish case, analysing
the sectoral evolution of regional employment.
More specifically, in this section we focus on the four main economic activities
(agriculture, industry, construction and services) assuming the European territorial units
NUTS-III at the Spanish level leading to a total of 47 provinces
1
.
The information has been provided by the Spanish Economically Active Population
Survey (EPA) whose methodology has been modified in 2005 due to several reasons:
- The need to adapt to the new demographic and labour reality of Spain, due
mainly to the increase in the number of foreign residents
- The incorporation of new European regulations in accordance with the
norms of the European Union Statistical Office (EUROSTAT)
- The introduction of improvements in the information gathering method
(changes in questionnaires and interviews carried out by the CATI method).
The shift-share analysis has been carried out during the period 1999-2004 leading to
some interesting findings related to sectoral and spatial patterns.


1
According to the methodology of our study, Ceuta and Melilla, the Balearic and Canary Islands are
excluded since the definition of neighbouring region does not exactly fit these cases.

15
The detection of spatial autocorrelation has been carried out through the usual tests,
leading to the conclusion that a positive spatial autocorrelation exists between the
Spanish provinces
2
.
Our study focuses on the competitive effect in order to empirically verify the fulfilment
of the additivity condition. Table 1 summarizes the results for this effect according to
different considered procedures.
Table 1: Aggregation of the competitive effect by regions in different models
Models Agriculture Industry Construction Services
Model (1.11) [Nazara and Hewings (2004)]
-16.389 -165.8 34.9 70.15
Model (1.14)
29.262 251.694 -80.413 -211.446
Model (1.15)
21.670 240.823 -46.809 -182.338

As previously stated, the spatial shift-share analysis of Nazara and Hewings does not
satisfy the property of additivity, since
( )
R
v
ij ij ij
j 1
X r r 0
=
− ≠

.
On the other hand, it should be noted that the results of models (1.14) and (1.15) are not
strictly comparable with those previously obtained, since the decomposition criteria are
not the same. In this case the expected variation of the employment during the period
1999-2004 is decomposed into three different effects according to the spatially modified
sectoral-regional rates of growth: R WR =

R being the matrix of growth rates and W
the matrix of binary spatial weights. The spatial aggregation leads to a non-null result,
as is shown in table 1.
Regarding the model (1.17) derived from the expected employment
v*
ij jk ik
k V
X w X

=

,
the spatial net competitive effect and the spatial locational effect result in zero.
In order to avoid the previously described problems related to changes in employment
we have also computed the results obtained when spatially modified sectoral weights
are considered:
v*
ij
v*
j
i
*
v*
ij
i j
X
X
X
X
=

∑∑
for both the spatial net competitive effect (SNCE*)
and the spatial locational effect (SLE), thus satisfying the additivity condition.

2
More specifically, the analysis of the employment rates referred to the initial year leads to a Moran´s I
z-value=5.987 with null p-value. Similar results (z=4.822, p=0) are obtained when analysing the
employment rate of growth in the considered period, also leading to the rejection of the non-
autocorrelation hypothesis.

16
The results of the spatial net competitive effect for European territorial units NUTS-III
at the Spanish level are summarized in table 2.
Table 2: Spatial net competitive effect (SNCE*) by sectors and NUTS III Spanish provinces,
according to Model 1.20
NUTS III Agriculture Industry Construction Services TOTAL
1 Álava
-3.442 2.816 -5.978 -6.217 -12.821
2 Albacete
2.242 -1.137 -1.468 -4.229 -4.592
3 Alicante
12.361 -2.932 28.278 14.743 52.449
4 Almería
1.490 17.148 12.819 14.173 45.629
5 Asturias
-4.186 -4.694 -8.477 -3.531 -20.888
6 Ávila
0.438 2.946 0.198 -7.672 -4.090
7 Badajoz
3.109 0.007 -5.129 -6.818 -8.832
8 Barcelona
-27.497 -39.795 -1.667 -49.333 -118.292
9 Burgos
-0.437 1.331 -5.804 -1.630 -6.540
10 Cáceres
1.087 4.519 -3.720 -9.331 -7.444
11 Cádiz
-0.169 -1.639 2.363 1.316 1.870
12 Cantabria
-0.944 2.891 -4.154 11.421 9.213
13 Castellón de la Plana
3.908 4.130 5.229 -15.592 -2.325
14 Ciudad Real
1.001 1.609 -1.863 -5.571 -4.824
15 Córdoba
1.044 0.856 0.028 11.746 13.673
16 Coruña (A)
-8.410 7.036 -10.008 -3.887 -15.269
17 Cuenca
1.561 -1.014 0.308 -2.631 -1.776
18 Girona
-2.193 3.397 2.469 14.021 17.694
19 Granada
4.135 3.335 -2.896 13.656 18.230
20 Guadalajara
0.540 1.539 0.019 9.035 11.133
21 Guipúzcoa
-9.348 -2.829 -12.275 -4.139 -28.591
22 Huelva
1.241 -10.282 2.195 2.597 -4.249
23 Huesca
0.194 2.827 -0.833 -4.626 -2.438
24 Jaén
-1.559 -5.266 -5.300 -1.503 -13.629
25 León
-2.481 0.924 -3.067 -25.058 -29.682
26 Lleida
-0.011 3.920 -4.440 -2.298 -2.828
27 Lugo
-1.611 9.701 -5.184 -3.732 -0.826
28 Madrid
39.135 -5.642 35.504 72.853 141.850
29 Málaga
11.766 -0.444 19.460 -10.354 20.427
30 Murcia
8.972 20.136 12.491 0.858 42.456
31 Navarra
-1.383 1.735 -5.520 -7.878 -13.045
32 Orense
0.423 -2.692 -3.921 -17.392 -23.581
33 Palencia
-0.704 2.899 -0.184 -4.834 -2.823
34 Pontevedra
-7.854 7.224 -4.732 -4.292 -9.654
35 Rioja (La)
-0.605 0.848 1.583 5.183 7.010
36 Salamanca
1.939 -0.570 1.009 -7.490 -5.112
37 Segovia
0.573 3.897 -1.491 -6.153 -3.174
38 Sevilla
4.675 -5.318 6.442 29.941 35.740
39 Soria
-0.563 0.395 -0.168 -4.695 -5.031
40 Tarragona
-2.013 14.323 -0.483 -8.225 3.602
41 Teruel
0.807 0.088 0.361 -6.077 -4.821
42 Toledo
-0.734 1.067 -0.224 3.501 3.610
43 Valencia
-10.507 6.763 -2.893 44.493 37.855
44 Valladolid
-5.284 -2.494 -3.247 -13.210 -24.234
45 Vizcaya
5.465 -4.545 -18.209 -19.005 -36.293
46 Zamora
-1.022 12.288 -2.334 1.081 10.013
47 Zaragoza
1.028 -2.708 -0.598 -7.304 -9.581
Total
16.175 48.595 4.488 -24.090 45.167

17
The comparison of these results with the values of the Esteban-Marquillas model (1.3),
show coincidences in the signs of the computed effects, since the same rates of growth
are applied. Nevertheless, as is shown in table 3, some outstanding changes are found in
the magnitude of the effects due to the use of the new spatially modified structure of
sectoral weights.

Table 3: Ratios SNCE**/SLE
Agriculture Industry Construction Services
SNCE**/SLE
1.058 0.998 1.004 0.993

More differences are detected in the spatial locational effect. For instance, the spatial
locational effect is positive when the evolution of sector i in region j is better than the
evolution of this sector
( )
ij i
r r 0 − > and the employment is above the expected value
based on its neighbouring links
( )
v**
ij ij
X X 0 − > . An important redistribution of the
locational effect is produced by the application of the new spatially modified structure.
Table 4 summarizes the values of the spatial locational effect based on the new spatially
modified structure of sectoral weights according to model (1.20).












18
Table 4: Spatial locational effect (SLE*) by sectors and NUTS III Spanish provinces, according to
Model 1.20
NUTS III Agriculture Industry Construction Services TOTAL
1 Álava
1.710 1.743 1.416 0.676 5.545
2 Albacete
0.684 -0.029 0.044 0.178 0.878
3 Alicante
-4.493 -0.397 -0.070 0.001 -4.959
4 Almería
2.391 -12.037 2.187 0.114 -7.346
5 Asturias
-1.109 0.034 -0.079 0.116 -1.038
6 Ávila
0.426 -1.221 0.077 0.373 -0.346
7 Badajoz
3.164 -0.003 -1.531 0.277 1.907
8 Barcelona
22.763 -18.079 0.380 0.565 5.629
9 Burgos
-0.024 0.424 -0.536 0.216 0.081
10 Cáceres
0.585 -2.525 -2.304 -0.148 -4.392
11 Cádiz
-0.020 0.507 0.524 0.069 1.080
12 Cantabria
-0.061 0.219 -1.029 -0.886 -1.758
13 Castellón de la Plana
-0.301 1.990 -0.426 2.212 3.474
14 Ciudad Real
0.410 -0.348 -1.012 0.403 -0.546
15 Córdoba
0.941 -0.135 0.001 -0.816 -0.008
16 Coruña (A)
-6.871 -0.958 -1.030 0.291 -8.567
17 Cuenca
3.237 0.356 0.087 0.506 4.186
18 Girona
0.718 0.476 0.194 -0.285 1.103
19 Granada
3.284 -1.709 -0.695 0.459 1.339
20 Guadalajara
0.026 0.029 0.004 -0.473 -0.413
21 Guipúzcoa
6.243 -1.686 2.303 0.363 7.223
22 Huelva
1.578 1.719 0.366 -0.346 3.318
23 Huesca
0.186 -0.618 -0.008 0.223 -0.217
24 Jaén
-2.621 1.179 -0.117 0.211 -1.348
25 León
-1.005 -0.167 -0.043 -0.205 -1.421
26 Lleida
-0.011 -1.347 -2.009 0.214 -3.153
27 Lugo
-6.451 -5.410 0.742 1.089 -10.031
28 Madrid
-34.692 1.155 -5.538 15.328 -23.748
29 Málaga
-5.255 0.236 5.456 -1.977 -1.540
30 Murcia
7.328 -3.493 0.265 -0.041 4.059
31 Navarra
0.034 0.777 0.461 1.076 2.348
32 Orense
0.269 0.329 -0.599 1.138 1.138
33 Palencia
-0.462 -0.203 0.024 0.175 -0.465
34 Pontevedra
-7.784 0.234 -0.338 0.642 -7.246
35 Rioja (La)
-0.188 0.483 -0.130 -1.148 -0.983
36 Salamanca
0.431 0.277 0.061 -0.962 -0.193
37 Segovia
0.423 -1.139 -0.248 0.136 -0.827
38 Sevilla
0.549 1.691 -0.381 3.141 5.000
39 Soria
-0.799 0.029 0.034 0.800 0.063
40 Tarragona
-0.328 -1.643 -0.183 0.388 -1.765
41 Teruel
0.717 0.016 0.041 1.184 1.958
42 Toledo
-0.149 0.281 -0.090 -0.652 -0.611
43 Valencia
4.052 0.890 -0.008 0.141 5.075
44 Valladolid
1.524 -0.375 0.122 0.112 1.384
45 Vizcaya
-4.573 -0.921 0.047 -0.703 -6.150
46 Zamora
-2.335 -8.387 -1.127 -0.151 -12.001
47 Zaragoza
-0.312 -0.841 0.204 0.065 -0.884
Total
-16.175 -48.595 -4.488 24.090 -45.167


19
The fulfilment of the additivity is observed in the last rows of tables 2 and 4, while table
5 summarizes the ratio between the spatial locational effect (SLE**) and the locational
effect (LE) of Esteban-Marquillas (1972).

Table 5: Ratio SLE**/LE
NUTS III Agriculture Industry Construction Services TOTAL
1 Álava
1.125 1.003 1.019 0.939 1.033
2 Albacete
0.847 1.093 1.170 0.857 0.855
3 Alicante
1.179 1.016 -1.296 -0.006 1.166
4 Almería
0.967 0.997 0.975 8.070 1.000
5 Asturias
0.828 0.769 0.681 0.824 0.817
6 Ávila
0.946 0.995 0.989 0.874 1.265
7 Badajoz
0.949 0.995 0.986 0.852 0.906
8 Barcelona
1.071 1.005 1.020 0.620 1.240
9 Burgos
0.494 1.007 0.955 0.950 2.018
10 Cáceres
0.907 0.996 0.993 1.794 1.023
11 Cádiz
0.682 0.993 0.981 1.154 1.004
12 Cantabria
0.541 1.029 0.983 0.917 0.918
13 Castellón de la Plana
3.512 1.004 1.057 0.953 0.911
14 Ciudad Real
0.881 0.990 0.992 0.912 1.179
15 Córdoba
0.942 0.987 0.923 0.908 0.241
16 Coruña (A)
0.937 0.984 0.959 0.914 0.945
17 Cuenca
0.974 0.994 0.985 0.965 0.975
18 Girona
1.202 1.016 0.947 0.743 1.243
19 Granada
0.935 0.996 0.982 1.264 0.923
20 Guadalajara
0.469 1.127 0.981 0.882 0.918
21 Guipúzcoa
1.090 1.004 1.024 0.926 1.080
22 Huelva
0.958 0.987 0.974 0.950 0.976
23 Huesca
0.946 0.990 0.681 0.873 1.183
24 Jaén
0.968 0.990 0.835 0.952 0.939
25 León
0.880 0.988 0.764 6.982 1.017
26 Lleida
0.950 0.994 0.990 0.930 0.996
27 Lugo
0.986 0.996 1.031 0.976 0.990
28 Madrid
1.066 0.990 1.029 1.035 1.083
29 Málaga
1.141 0.996 0.985 1.038 2.102
30 Murcia
0.937 0.988 0.829 0.872 0.890
31 Navarra
-0.795 1.005 1.055 0.951 1.021
32 Orense
0.920 0.983 0.972 0.903 0.895
33 Palencia
0.922 0.970 1.034 0.837 0.975
34 Pontevedra
0.947 1.071 0.942 0.955 0.943
35 Rioja (La)
0.850 1.004 1.056 0.969 0.938
36 Salamanca
0.801 0.996 0.933 1.058 6.935
37 Segovia
0.931 0.993 0.974 0.759 1.078
38 Sevilla
0.681 0.993 1.080 1.072 0.983
39 Soria
0.963 1.030 1.022 0.960 0.994
40 Tarragona
0.747 0.982 0.989 0.870 0.954
41 Teruel
0.942 1.012 0.963 0.965 0.957
42 Toledo
0.787 1.008 0.989 0.964 0.899
43 Valencia
1.167 1.017 0.392 -0.823 1.221
44 Valladolid
1.236 1.015 1.131 0.547 1.176
45 Vizcaya
1.070 1.011 -1.448 1.234 1.063
46 Zamora
0.976 0.997 0.991 0.952 0.992
47 Zaragoza
1.222 1.007 1.013 0.558 1.144
Total
1.076 1.015 0.961 0.998 1.040

20
6. Concluding Remarks
This paper summarizes some alternative ways to include spatial interrelations in a shift-
share model. Since these alternatives are usually based on the definition of spatial
weights, each proposal leading to different results, some rules have been specified in
order to avoid wrong specifications.
The inclusion of spatial relations in the well-known shift-share identity allows the use of
spatial econometrics techniques thus providing a wide variety of possibilities in regional
analysis.
Furthermore, the introduction of a spatially modified competitive effect can be useful
for understanding the effects on employment of some regional policies, that also affect
their neighbouring regions.
The empirical application of these models to regional Spanish employment shows that
the higher competitive effects are found in the agricultural and construction sectors,
while industry and services lead to lower results.
More outstanding changes have been found in the locational effect, whose signs could
be affected by the proposed specification for spatial relations.
Finally, we must emphasize that these procedures present certain limitations, mainly
related to their deterministic character and also to the arbitrariness inherent in
considered spatial relations. Therefore further research needs to be carried out,
including both stochastic formulation and an exhaustive study of the spatial weights
matrices.


21
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Spatial shift-share analysis: new developments and some findings for the Spanish case

Matías Mayor Fernández; mmayorf@uniovi.es Ana Jesús López Menéndez; anaj@uniovi.es Department of Applied Economics University of Oviedo (Spain)

1. Introduction Shift-share analysis is a statistical tool allowing the study of regional development by means of the identification of two types of factors. The first group of factors operates in a more or less uniform way throughout the territory under review, although the magnitude of its impact on the different regions varies with its productive structure. The second type of factors has a more specific character and operates at the regional level. Although according to Dunn (1960) the main objective of the shift-share technique is the quantification of geographical changes, the existence of spatial dependence and/or heterogeneity has barely been considered. The classical shift-share approach analyses the evolution of an economic magnitude between two periods identifying three components: a national effect, a sectoral effect and a competitive effect. However, this methodology focuses on the dependence of the considered regions with respect to national evolution but it does not take into account the interrelation between geographical units. The need to include the spatial interaction has been recognized by Hewings (1976) in his revision of shift-share models. In the classical formulation this spatial influence is gathered in a certain way, since the local predictions should converge to the national aggregate. Nevertheless, at the same time the estimation of the magnitude of the sector i in the region j is supposed to be independent of the growth of the same sector in another region k, an assumption which would only make sense in the case of a self-sufficient economy.

2

is based on the modification of the classical identities of deterministic shift-share analysis by adding some new extensions. In the third section some models of spatial dependence are presented including the approach of Nazara and Hewings (2004) and some new proposals. the effects identified in the shift-share analysis are not independent. This paper starts with a brief exposition of the classical shift-share identity. The first one. which is the aim of this paper. The estimation of spatial dependence is needed for both the identification of the effects and the computation of forecasts. also describing the introduction of spatial dependence structures through spatial weights matrices. This idea is also expressed by Nazara and Hewings (2004). 3 . since similarly structured regions can be considered in a sense to be “neighbouring regions” of a specified one. who assign great importance to spatial structure and its impact on growth. The aim is to obtain a competitive effect without spatial influence.The increasing availability of data together with the development of spatial econometric techniques allow the incorporation of spatial effects in shift-share analysis. The second is based on a regression model (stochastic shift-share analysis) and the inclusion of spatial substantive and/or residual dependence. any spatial unit is affected by the positive and negative effects transmitted from its neighbouring regions. As a consequence. 2. According to Isard (1960). allowing the distinction between a common pattern in the neighbouring regions and an individual pattern of the specific considered region. Shift-share analysis and spatial dependence The introduction of spatial dependence in a shift-share model can be carried out by two alternative methods. An application of these models to Spanish employment is presented in section four and the paper ends with some concluding remarks summarized in section five. thus exercising influence on the evolution of its economic magnitudes.

respectively.r ) + X ij ( rij . Secondly. Classical shift-share analysis If we denote by Xij the initial value of the considered economic magnitude corresponding to the i sector in the spatial unit j. resulting in the dependence of both effects. which should be reflected in the model by means of the incorporation of some term of spatial interaction. the competitive effect collects the special dynamism of a sector in a region in comparison with the dynamism of the same sector at the national level. known as the net effect.1.2. in the first place. Dinc et. we need to notice that the results are sensitive to the degree of sectoral aggregation and furthermore. besides the national growth we should consider the positive or negative contributions derived from each spatial environment. a property which Loveridge and Selting (1998) call “zero national deviation”. In turn. The shift-share analysis has some limitations derived. which are not updated with the changes of the productive structure. from an arbitrary election of the weights.X ij = ∆X ij = X ijr + X ij ( ri . the growth attributable to secondary multipliers is assigned to the competitive effect when it should be collected by the sectoral effect. X´ij being the final value of the same magnitude. Thus the sectoral effect collects the positive or negative influence on the growth of the specialization of the productive activity in sectors with growth rates over or under the average. al.ri ) (1. 4 .1) ' X ij − X ij r= ∑∑ (X i =1 j=1 S R S R ' ij − X ij ) ri = ij ∑(X j=1 R R ' ij − X ij ) ij ∑∑ X i =1 j=1 ∑X j=1 rij = X ij The three terms of this identity correspond to the shift-share effects: National Effect Sectoral or structural Effect Re gional or competitive Effect EN ij = X ijr ESij = X ij ( ri − r ) ER ij = Xij ( rij − ri ) As it can be appreciated. (1998) emphasize the complexity related to the increasing of the spatial dependences between the sectors and the regions. Besides the previously described problems. Once the regional and sectoral effects are calculated for each industry. their sum provides a null result. then the change experienced by this variable can be expressed as follows: ' X ij .

3) The third element of the right hand side of the equation is known as the “net competitive effect”. whose model includes a specific regional effect (which is similar to the national effect in the classic identity) and a sectoral regional effect.5) ESR ij = X ij  rij − rj − ( ri − r )    ( ) It must be noted that these models include a comparison between region and nation but nevertheless they still assume each specific region to be independent from the others and therefore no spatial patterns are included. corresponding to the last term of identity (1.3) ij and measuring the specialization degree. if the sectoral structure of that region is assumed to be coincident with the national one. which measures the advantage or disadvantage of each sector in the region with respect to the total. is given by Esteban-Marquillas (1972) who introduced the idea of “homothetic change”.A solution to the interdependence between the sectoral and regional components. reflecting the amount of growth derived from the regional industry-mix: ER ij = X ij rj − r ( ) (1. the homothetic change of sector i in region j is given by the expression: X = ∑ X ij * ij i =1 S R S ∑∑ X i =1 j=1 j=1 S R ∑ Xij ij = ∑∑ X i =1 j=1 j=1 S R ∑X ij ∑X ij j=1 R ij (1. In this way. An alternative approach is provided by Arcelus (1984). The part of growth not included in this effect when X ij ≠ X∗ is called the “locational effect”. derived from the fact that both effects depend on the industrial structure. 5 . This concept is defined as the value which would take the magnitude of sector i in region j .4) (1.2) leading to the following shift-share identity: ∆X ij = Xij r + X ij ( ri − r ) + X∗ rij − ri + X ij − X∗ ij ij ( ) ( ) (r ij − ri ) (1.

the symmetry allows the reduction of this size to N(N − 1) . It must also be kept in mind that the economic structure of each spatial unit will depend on some regions that are “neighbouring regions” in some sense.2. The structure of spatial dependence: Spatial Weights We need to develop a more complete version of shift share identity since each region should not be considered as an independent reality. non-stochastic matrix whose elements wjk show the intensity of interdependence between the spatial units j and k. A suitable approach is the definition of a spatial weights matrix. In the empirical application included in this paper these spatial units are the European territorial units NUTS-III at the Spanish level.  0 w W =  21  ⋅   w R1 w12 0 ⋅ wR2 ⋅ w1R  ⋅ w 2R   ⋅ ⋅   ⋅ 0  (1.6) X j X k being observations of the considered variables in units j and k. A well-known alternative is the 6 . this relation being more intense when the considered units are closer. In this way. In general terms. given N regional observations it would be necessary to establish N2 terms of covariance between the observations. showing the existence of a functional relation between what happens at a spatial point and in the population as a whole. The concept of spatial autocorrelation attributed to Cliff and Ord (1973) has been the object of different definitions and. X k = E X jX k − E X j E ( X k ) ≠ 0 ( ) ( ) ( ) (1. Nevertheless. thus solving the problems of multi-directionality of spatial dependence. these effects should be finite and non-negative and they could be collected according to diverse options.7) According to Anselin (1988). establishing that any spatial unit is related to any other. Tobler´s law of geography (1979) is assumed.2. it implies the absence of independence between the observations. which could be measured in latitude and length. The existence of spatial autocorrelation can be expressed as follows: Cov X j . surface or any spatial units. in a generic sense. 2 The spatial weights are collected in a squared.

the weights are standardised so that they satisfy the following conditions: 0≤wjk≤1 ∑w k jk = 1 for each row j X = WX According to the last condition. 7 . based on the criterion of physical contiguity and initially proposed by Moran (1948) and Geary (1954). In order to allow an easy interpretation. the contiguity can be defined according to a specific distance: w jk = 1 d jk ≤ δ d jk being djk the distance between two spatial units and δ the maximum distance allowed so that both be considered neighbouring units.Boolean matrix. Thus. such as the non-inclusion of asymmetric relations. the value of a variable in a certain location can be obtained as an average of the values in its neighbouring units. the elements of the main diagonal of this matrix being null. The consideration of different criteria for the development of the spatial weights matrix can deeply affect the empirical results. In a similar way the weights proposed by Cliff-Ord depend on the length of the common border adjusted by the inverse distance between both locations: w jk = bβ jk dα jk (1. the considered matrix shows some limitations. which is a requirement included in the five principles established by Paelink and Klaasen (1979). From a more general perspective. These authors assume wjk=1 if j and k are neighbouring units and wjk=0 in another case. weights should consider the potential interaction between the units j and k and could be computed as: w jk = w jk = e −βd jk 1 and dα jk .8) b jk being the proportion that the common border of j and k represents with respect to the total j perimeter. Together with the advantages of simplicity and easy use.

with − w ij = GDP 2 t =0 d ij2 and Boarnet (1998). Vayá and Artís (2004). This definition assumes that the spillover effect of a specific area is a direct function on its size. Some alternative definitions have been developed by Fingleton (2001). and an inverse function of the distance between the considered areas. Stetzer (1982) establishes three basic ideas in the context of a space-temporary model: the existence of different results depending on the considered weights. it would be interesting to compare these results with those related to some alternative weights defined as a function of the economic variables of interest. measured as the number of employees.In some cases the definition of weights is carried out according to the concept of “economic distance” as defined by Case et al. (1993) with w jk = 1 X j − Xk Xj and Xk being the per capita income or some related magnitude. the need of a set of rules allowing the definition of suitable weights. finally. Some other authors as LópezBazo et al. In this sense. (1999) propose the use of weights based on commercial relations. the risk of a wrong specification of spatial weights and.10) with w jj = 0 . 8 . 1 X j − Xk w jk = 1 ∑ X j − Xk j (1. Given the diversity of options for the specification of weights. The consideration of a binary matrix with weights based only on distance measures guarantees exogeneity but it can also affect the empirical results as indicated by LópezBazo. whose weights increase with the similarity between the investigated regions. η being a smoothing parameter.9) The matrix proposed by Molho (1995) focuses on the employment levels Ej: w jk = E je l≠ j ( −ηD jk ) ( −ηD jl ) ∑ E le (1.

the sectoral effect or industry mix neighbouring regions-nation effect shows a positive value when the evolution of the considered sector in the neighbouring regions of j is higher than the average. and analyse their suitability.3. In the second place. Three components are considered in expression(1. The extension of the shift-share model proposed by Nazara and Hewings (2004) introduces the spatially modified growth rates according to the previously assigned spatial weights: rij = r + ( rijv − r ) + ( rij − rijv ) (1. Models of spatial dependence In this section we present some proposals for the inclusion of the spatial structure in a shift-share model.11) where rijv is the rate of growth of the i sector in the neighbouring regions of a given spatial unit j which can be obtained as follows:  t +1 t   ∑ w jk X ik − ∑ w jk X ik  k∈v  rijv =  k∈v t ∑ w jk Xik k∈v (1.13) It must be noted that the w jk elements correspond to the previously defined matrix of standardized weights by rows. which is equivalent to the first effect of the classical (non spatial) shiftshare analysis. In any case. the third term is the competitive region-neighbouring regions effect and compares the rate of growth in region j of a given sector i with the evolution of the 9 .12) and the rate of growth of the total employment is also defined for each unit j as a function of its neighbouring structure:  t +1 t   ∑ w jk X k − ∑ w jk X k  k∈v  rjv =  k∈v t ∑ w jk X k k∈v (1. Finally. the first one corresponding to the national effect. regional interactions are supposed to be constant between the considered periods of time as is usually assumed in spatial econometrics.11).

instead of endogenous matrices.15) An alternative approach to what extent a spatial unit is being affected by the neighbouring territories would consist in introducing homothetic effects analogous to 10 .12) and (1. a negative value of this effect shows a regional evolution that is worse than the one registered in the neighbouring regions. Thus. The introduction of spatial dependence could be carried out more intuitively by considering the variables in relative terms such as the growth rates and thus decomposing the spatially modified rate of growth ( Wrij ) according to the following expression: Wrij = r + ( ri − r ) + ( Wrij − ri ) (1. Nevertheless another identity could be considered by defining rates of growth over the spatially modified variables: Wrij = r v + ( riv − r v ) + ( Wrij − riv ) (1. the binary matrix.14) As it can be seen only the sectoral-regional rate of growth is modified and therefore the global and sectoral rates of growth are computed as an aggregation of the evolution registered in sub-regional levels. A weakness can be found in the previously defined model.13) an average value is obtained of the considered variable as a function of the values of its neighbouring regions. since a single spatial weight matrix is considered for the computation of the different spatially modified rates of sectoral and global growth. This assumption would not be so problematic if we used. This fact can be easily understood since the global and sectoral rates of growth are the results of economic evolution including spatial dependence. meaning that region j fails to take advantage of the positive influence of its neighbouring regions.spatially modified sector. which would vary sensitively depending on the sectoral or global adopted perspective. On the other hand. the use of the same structure of weights in the initial and final periods could be considered excessively simplistic. It is worth noting that in expressions (1. suggesting the need of developing some dynamic version.

17) where the value of the magnitude in function of the neighbouring regions is obtained as: v* X ij = ∑ w jk X ik k∈V (1.those defined by Esteban-Marquillas (1972) but referring to regional environment. In this way.16) ik A more complete option is based on the use of spatial weights matrix. leading to a more difficult interpretation and comparison of the obtained results. The identity would then be the following v* v* ∆X ij = X ijr + X ij ( ri − r ) + X ij ( rij − ri ) + ( X ij − X ij ) ( rij − ri ) (1. the expected level of employment would be different to the effective one. as a consequence of the considered expression. which would be computed according to a certain structure of spatial weights (W) and the employment effectively computed for each combination regionsector.18) V being the set of neighbouring regions of j. the homothetic change with respect to the neighbouring regions would be given by the expression: X = ∑ X ik v ij i =1 S ∑∑ X i =1 k∈v k∈v S ∑X ik (1. the magnitudes of the effects for each sector-region are going to be in some cases sensitively different to those obtained in the equivalent model of EstebanMarquillas (1972). 11 . In this case the economic magnitude is defined in function of the neighbouring values. j This could introduce two kinds of doubts with respect to the utility of this definition: on the one hand. i. More specifically. One of the drawbacks of this spatially influenced employment is related to the fact that. On the other hand. it can be observed that: ∑X i. j v* ij ≠ ∑ X ij . we would be able to define the value the magnitude of the sector i in the region j would have taken if the sectoral structure of j were similar to its neighbouring regions. as a result of the structure of the spatial weights. and therefore the concept of homothetic employment would be substituted by spatially influenced employment.

The property of additivity region-region The study of spatial interrelations suggests the need of a prior exploratory analysis allowing the detection of spatial autocorrelation.20) 4. j v** ij = ∑ X ij .19) It must be noticed that this new concept satisfies the identity ∑X i.17) leads to the identity: v** v** X ijr + X ij ( ri − r ) + X ij ( rij − ri ) + ( X ij − X ij ) ( rij − ri ) (1.i≠ j (1. leading to the X v* values: v** X ij = X j X iv* X v* (1.In order to try to solve both problems. j substantial differences are found in the distribution of the variable for each combination sector-spatial unit. i =1 j=1 n n 12 . The substitution of the expression (1.19) in (1.21) 2 i with z i = X i − X and S0 = ∑∑ w ij . The objective is to analyse whether the spatial structure of the investigated phenomenon is significant and can be easily interpreted and also if it is possible to obtain any information referring to the process generating this distribution in the space.18): ∑∑ X i =1 j=1 j=1 S R ∑X v* ij = v* ij X iv* . The detection of spatial autocorrelation can be carried out by means of diverse tests such as those of Geary (1954) and Moran (1948). This last alternative will be used in the empirical applications of this work and is based on the expression: n I= S0 ∑∑ w z z i =1 j1= n ij i n n j ∑z i =1 . an alternative interpretation of modified employment is proposed based on a new spatially modified structure of sectoral weights R based on the spatially influenced employment (1. although i.

that is. then the Moran test can be carried out from an asymptotically normal distribution. • For a given region j. the sum of the shift-share components for all the spatial levels included in a specific region j is equal to the corresponding component computed at the j regional level. Once the presence of spatial autocorrelation is detected we should examine the fulfilment of the additivity property in the extended models. The following conditions are required for this decomposition: • For a given sector. For Upton and Fingleton (1985) this normality depends on the number of considered links and the way in which they are connected. on the structure of the spatial weights matrix.With regard to the distribution used in the statistical tests. the shift-share component of a sector i is equal to the sum of the respective components of all the sub-sectors including in sector i. the independence of any decomposition of a magnitude with respect to the level of detail of the considered data (including both sectoral and spatial perspectives) is desirable. Stokes (1974) shows that the competitive effect modified according to the Marquillas criteria does not satisfy the property of additivity region-region and the following expression holds: E* −1 ( rij − ri ) = E*1t −1 rij1 − ri + E* 2 t −1 rij2 − ri ijt ij ij ? ( ) ( ) (1. In fact. In the traditional version each of the components satisfies the first condition while the second condition is verified only for the national effect. Haynes and Machunda (1987) analyse the problems related to the traditional extensions of shift-share analysis with regard to this property of “additivity region-region” also denoted “transformations invariance”. then its growth rate can be obtained as a weighted 13 . it can be shown that if a region is divided into its corresponding components. Cliff and Ord (1981) show that if the sample size is sufficiently large. From an empirical point of view.22) It must be noted that the previous expression is not strictly correct since it does not keep in mind that the growth rate of a region can be expressed as a function of the growth rates of the spatial units included in it.

that is to say. where k denotes the spatial units included in region j.11) or ∑(X (r j=1 v* ij ij v* − ri ) + ( X ij − X ij ) ( rij − ri ) = 0 in (1. construction and services) assuming the European territorial units NUTS-III at the Spanish level leading to a total of 47 provinces1. so that the sum of the competitive effect for the considered regions is ∑ Xij ( rij − rijv ) = 0 j in (1. due mainly to the increase in the number of foreign residents The incorporation of new European regulations in accordance with the norms of the European Union Statistical Office (EUROSTAT) The introduction of improvements in the information gathering method (changes in questionnaires and interviews carried out by the CATI method). In the empirical application included in the next paragraph we analyse the fulfilment of this property for each sector.17) . Haynes and Machunda (1987) consider that the analysis of Stokes (1974) of the property of additivity region to region is wrong since it does not include the former reasoning about the rates of regional growth. analysing the sectoral evolution of regional employment. The information has been provided by the Spanish Economically Active Population Survey (EPA) whose methodology has been modified in 2005 due to several reasons: The need to adapt to the new demographic and labour reality of Spain.average of the sub-regional growth rates. More specifically. the Balearic and Canary Islands are excluded since the definition of neighbouring region does not exactly fit these cases. in this section we focus on the four main economic activities (agriculture. The shift-share analysis has been carried out during the period 1999-2004 leading to some interesting findings related to sectoral and spatial patterns. industry. ) 5. According to the methodology of our study. 1 14 . given by rj = ∑ k =1 n X jk Xj rjk . Ceuta and Melilla. Some findings for the Spanish case The previously described developments can be applied to the Spanish case.

Table 1: Aggregation of the competitive effect by regions in different models Models Model (1. Table 1 summarizes the results for this effect according to different considered procedures.823 Construction 34.987 with null p-value.17) derived from the expected employment X ij = ∑ w jk X ik . as is shown in table 1. the analysis of the employment rates referred to the initial year leads to a Moran´s I z-value=5. v* Regarding the model (1. the spatial shift-share analysis of Nazara and Hewings does not satisfy the property of additivity. More specifically.694 240.822. k∈V the spatial net competitive effect and the spatial locational effect result in zero.389 29. since the decomposition criteria are not the same. since ∑ X (r j=1 ij R ij − rijv ) ≠ 0 . Our study focuses on the competitive effect in order to empirically verify the fulfilment of the additivity condition.9 -80.8 251.14) Model (1.15 -211.The detection of spatial autocorrelation has been carried out through the usual tests. it should be noted that the results of models (1. On the other hand.11) [Nazara and Hewings (2004)] Model (1.338 As previously stated.14) and (1. In this case the expected variation of the employment during the period 1999-2004 is decomposed into three different effects according to the spatially modified sectoral-regional rates of growth: R = WR R being the matrix of growth rates and W the matrix of binary spatial weights. Similar results (z=4.809 Services 70.413 -46. In order to avoid the previously described problems related to changes in employment we have also computed the results obtained when spatially modified sectoral weights are considered: ∑X j i j v* ij ∑∑ X = v* ij X iv* for both the spatial net competitive effect (SNCE*) X* and the spatial locational effect (SLE). thus satisfying the additivity condition. The spatial aggregation leads to a non-null result. also leading to the rejection of the nonautocorrelation hypothesis.15) are not strictly comparable with those previously obtained.262 21.446 -182. 2 15 .15) Agriculture -16. p=0) are obtained when analysing the employment rate of growth in the considered period. leading to the conclusion that a positive spatial autocorrelation exists between the Spanish provinces2.670 Industry -165.

595 Construction -5.490 -6.173 -3.058 -2.348 1.592 -5.488 Services -6.247 -18.028 -10.318 0.932 17.183 -7.692 2.573 4.824 13.293 10.609 0.184 35.195 -0.013 0.602 -4.442 2.135 0.109 -27.194 -1.491 -5.483 0.067 6.284 5.175 Industry 2.438 -13.438 3.278 12.20 NUTS III 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Álava Albacete Alicante Almería Asturias Ávila Badajoz Barcelona Burgos Cáceres Cádiz Cantabria Castellón de la Plana Ciudad Real Córdoba Coruña (A) Cuenca Girona Granada Guadalajara Guipúzcoa Huelva Huesca Jaén León Lleida Lugo Madrid Málaga Murcia Navarra Orense Palencia Pontevedra Rioja (La) Salamanca Segovia Sevilla Soria Tarragona Teruel Toledo Valencia Valladolid Vizcaya Zamora Zaragoza Total Agriculture -3.304 -24.014 3.230 11.363 -4. according to Model 1.316 11.819 -8.829 -10.740 -5.850 20.972 -1.275 2.169 -0.720 2.559 -2.571 11.224 0.135 11.695 -8.519 -1.136 1.300 -3.673 -15.708 48.021 13.333 -1.209 -2.978 -1.863 0.186 0.010 -5.035 -4.816 -1.893 -3.828 -0.854 -0.503 -25.848 -0.081 -7.545 12.827 -5.493 -13.421 -15.629 -20.449 45.397 3.335 1.174 35.184 -4.067 -4.804 -3.225 -6.642 -0.361 -0.583 1.539 -2.334 -0.005 1.193 4.694 2.888 -4.746 -3.531 -7.423 -0.168 -0.008 0.383 0.019 -12.891 4.210 -19.460 12.213 -2.823 -9.732 72.631 14.682 -2.921 -0.629 -29.856 7.897 -5.229 -1.946 0.795 1.497 -0.308 2.130 1.656 9.088 1.908 1.491 6.667 -5.139 2.217 -4.044 -8.354 0.504 19.154 5.540 -7.896 0.630 -9.112 -3.001 1.818 -49.605 1.167 16 .734 -10.834 -4.858 -7.234 -36.626 -1. Table 2: Spatial net competitive effect (SNCE*) by sectors and NUTS III Spanish provinces.591 -4.520 -3.540 -9.011 -1.939 0.442 -0.592 52.732 1.776 17.490 -4.870 9.561 -2.440 -5.833 -5.028 16.325 -4.269 -1.807 -0.887 -2.481 -0.224 -2.242 12.288 -2.331 4.494 -4.654 7.763 -2.292 -6.444 1.323 0.395 14.821 3.581 45.563 -2.853 -10.675 -0.298 -3.855 -24.581 -2.090 TOTAL -12.944 3.597 -4.468 28.507 -5.610 37.The results of the spatial net competitive effect for European territorial units NUTS-III at the Spanish level are summarized in table 2.924 3.031 3.444 20.456 -13.229 14.826 141.899 7.013 -9.282 2.077 3.361 1.133 -28.735 -2.743 14.153 29.701 -5.832 -118.036 -1.331 1.611 39.821 -4.501 44.241 0.694 18.007 -39.148 -4.704 -7.022 1.465 -1.087 -0.392 -4.090 -8.437 1.598 4.766 8.198 -5.639 2.477 0.427 42.570 3.672 -6.920 9.129 -1.045 -23.137 -2.878 -17.292 5.249 -2.410 1.009 -1.266 0.469 -2.941 -4.

some outstanding changes are found in the magnitude of the effects due to the use of the new spatially modified structure of sectoral weights. show coincidences in the signs of the computed effects.3). Nevertheless. An important redistribution of the locational effect is produced by the application of the new spatially modified structure. since the same rates of growth are applied.993 More differences are detected in the spatial locational effect. Table 3: Ratios SNCE**/SLE Agriculture SNCE**/SLE 1.058 Industry 0.998 Construction 1. 17 .20).004 Services 0.The comparison of these results with the values of the Esteban-Marquillas model (1. For instance. Table 4 summarizes the values of the spatial locational effect based on the new spatially modified structure of sectoral weights according to model (1. the spatial locational effect is positive when the evolution of sector i in region j is better than the evolution of this sector ( rij − ri ) > 0 and the employment is above the expected value v** based on its neighbouring links ( X ij − X ij ) > 0 . as is shown in table 3.

079 0.277 -1.034 -0.742 -5.777 0.219 1.618 1.304 0.977 -0.016 0.204 -4.346 -1.141 0.284 0.141 0.339 -0.392 1.525 0.205 0.506 -0.112 -0.921 -8.800 0.116 0.335 -0.348 -0.329 -0.538 5.009 0.676 0.524 -1.044 -0.531 0.103 1.001 -0.507 0.043 -2.291 0.211 -0.758 3.024 0.303 0.476 -1.347 -5.217 -1.175 Industry 1.020 -0.080 -1.008 0.186 -2.077 -1.545 0.179 -0.090 -0.149 4.122 0.346 0.763 -0.941 -6.194 -0.031 -23.223 3.493 0.069 -0.089 15.421 -3.109 0.348 1.884 -45.212 0.871 3.827 5.061 -0.426 -1.127 0.041 1.117 -0.167 18 .008 -8.540 4.473 0.546 -0.629 0.214 1.348 -1.024 -0.642 -1.312 -16.187 -0.236 -3.958 0.403 -0.070 2.465 -7.959 -7.246 -0.150 -12.151 0.565 0.175 0.138 -0.748 -1.178 0.397 -12.328 0.000 0.130 0.375 -0.990 -0.138 0.012 0.684 -4. according to Model 1.005 -0.585 -0.203 0.167 -1.052 1.381 0.962 0.356 0.265 0.524 -4.041 -0.743 -0.001 0.474 -0.573 -2.164 22.799 -0.366 -0.090 TOTAL 5.493 2.221 -0.148 -0.578 0.709 0.567 4.890 -0.611 5.029 -1.234 0.087 0.431 0.269 -0.907 5.413 7.599 0.621 -1.410 1.075 1.695 0.248 -0.081 -4.718 3.026 6.424 -2.076 1.878 -4.029 -0.451 -34.765 1.255 7.423 0.456 0.461 -0.958 -0.034 0.549 -0.034 -1.426 3.595 Construction 1.148 0.328 -1.030 0.983 -0.488 Services 0.155 0.301 0.139 1.719 -0.391 -1.237 0.318 -0.692 -5.029 -0.652 0.059 2.186 1.153 -10.380 -0.281 0.387 -0.462 -7.710 0.841 -48.686 1.065 24.703 -0.338 -0.216 -0.643 0.691 0.346 1.188 0.008 -0.277 0.416 0.410 0.20 NUTS III 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Álava Albacete Alicante Almería Asturias Ávila Badajoz Barcelona Burgos Cáceres Cádiz Cantabria Castellón de la Plana Ciudad Real Córdoba Coruña (A) Cuenca Girona Granada Guadalajara Guipúzcoa Huelva Huesca Jaén León Lleida Lugo Madrid Málaga Murcia Navarra Orense Palencia Pontevedra Rioja (La) Salamanca Segovia Sevilla Soria Tarragona Teruel Toledo Valencia Valladolid Vizcaya Zamora Zaragoza Total Agriculture 1.Table 4: Spatial locational effect (SLE*) by sectors and NUTS III Spanish provinces.079 0.038 -0.363 -0.004 2.243 1.816 0.886 2.483 0.183 0.061 -0.047 -1.285 0.184 -0.193 -0.328 0.784 -0.223 0.388 1.001 -1.384 -6.037 0.011 -6.717 -0.114 0.373 0.029 -1.135 -0.136 3.536 -2.003 -18.459 -0.063 -1.

070 0. Table 5: Ratio SLE**/LE NUTS III 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Álava Albacete Alicante Almería Asturias Ávila Badajoz Barcelona Burgos Cáceres Cádiz Cantabria Castellón de la Plana Ciudad Real Córdoba Coruña (A) Cuenca Girona Granada Guadalajara Guipúzcoa Huelva Huesca Jaén León Lleida Lugo Madrid Málaga Murcia Navarra Orense Palencia Pontevedra Rioja (La) Salamanca Segovia Sevilla Soria Tarragona Teruel Toledo Valencia Valladolid Vizcaya Zamora Zaragoza Total Agriculture 1.837 0.015 1.The fulfilment of the additivity is observed in the last rows of tables 2 and 4.933 0.071 1.937 0.988 1.202 0.083 2.018 1.974 1.541 3.949 1.801 0.937 -0.874 0.240 2.012 1.154 0.078 0.392 1.945 0.942 0.993 0.034 0.850 0.899 1.183 0.920 0.681 0.972 1.072 0.994 0.955 0.013 0.681 0.981 0.547 1.993 1.995 1.030 0.017 1.872 0.952 6.033 0.965 0.243 0.264 0.024 0.040 19 .007 1.987 0.997 1.764 0.855 1.952 0.990 1.922 0.983 1.179 0.017 0.469 1.125 0.019 1.967 0.141 0.976 1.994 0.957 0.093 1.031 1.020 0.076 Industry 1.895 0.035 1.890 1.057 0.950 1.882 0.914 0.953 0.996 0.975 0.829 1.852 0.930 0.066 1.512 0.974 0.974 1.985 0.990 0.005 1.976 1.939 0.021 0.835 0.787 1.265 0.494 0.016 0.990 0.991 1.747 0.970 1.166 1.983 0.743 1.931 0.989 0.988 0.241 0.992 0.681 0.996 1.022 0.828 0.234 0.620 0.131 -1.007 0.008 1.992 1.926 0.448 0.981 1.794 1.908 0.006 8.015 Construction 1.947 0.942 0.795 0.947 0.917 0.011 0.983 0.023 1.996 0. while table 5 summarizes the ratio between the spatial locational effect (SLE**) and the locational effect (LE) of Esteban-Marquillas (1972).080 0.222 1.102 0.911 1.870 0.912 0.090 0.817 1.942 1.682 0.954 0.923 0.170 -1.221 1.995 0.969 1.918 1.998 TOTAL 1.965 0.990 1.946 0.873 0.986 1.880 0.989 0.964 -0.939 1.906 1.976 1.950 0.005 0.975 0.994 1.071 0.938 6.824 0.055 0.997 0.935 0.963 0.982 0.993 0.127 1.004 0.918 0.004 0.943 0.176 1.951 0.959 0.144 1.993 1.179 0.823 0.990 0.881 0.167 1.960 0.004 0.000 0.982 1.955 0.984 0.946 0.236 1.038 0.296 0.907 0.950 0.004 0.080 1.923 0.058 0.063 0.935 1.975 1.989 0.029 1.961 Services 0.958 0.903 0.968 0.056 0.769 0.996 0.985 0.003 1.996 0.016 0.986 1.070 0.996 0.987 0.857 -0.558 0.847 1.982 0.029 0.759 1.990 0.963 0.

The empirical application of these models to regional Spanish employment shows that the higher competitive effects are found in the agricultural and construction sectors. mainly related to their deterministic character and also to the arbitrariness inherent in considered spatial relations. whose signs could be affected by the proposed specification for spatial relations. The inclusion of spatial relations in the well-known shift-share identity allows the use of spatial econometrics techniques thus providing a wide variety of possibilities in regional analysis. including both stochastic formulation and an exhaustive study of the spatial weights matrices. Since these alternatives are usually based on the definition of spatial weights. Furthermore. each proposal leading to different results. Concluding Remarks This paper summarizes some alternative ways to include spatial interrelations in a shiftshare model. while industry and services lead to lower results. we must emphasize that these procedures present certain limitations. the introduction of a spatially modified competitive effect can be useful for understanding the effects on employment of some regional policies. Finally. 20 . that also affect their neighbouring regions.6. Therefore further research needs to be carried out. some rules have been specified in order to avoid wrong specifications. More outstanding changes have been found in the locational effect.

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