American Institute of Certified Planners (AICP) Practice Exam

Which analysis breaks down employment changes into national growth, industry mix, and competitive effects?

1. Location Quotient Analysis

2. Input-Output Analysis

3. Shift-Share Analysis

4. Cost Benefit Analysis

The correct answer is: Shift-Share Analysis

Shift-Share Analysis is a powerful tool used in regional economic analysis to decompose changes in employment into three specific components: national growth, industry mix, and competitive effects. The national growth component captures the overall trend in employment growth at the national level, reflecting broader economic conditions that influence all regions. The industry mix component accounts for changes in employment due to the region's particular industrial structure compared to the national industry structure; it highlights how shifts within specific industries impact local employment. Finally, the competitive effects component evaluates how well a region’s industries are performing relative to national trends, indicating whether a region is gaining or losing employment in specific sectors relative to competitive performance. This decomposition helps planners and policymakers understand the underlying factors driving employment changes, allowing them to address specific challenges or seize opportunities within their local economies. In contrast, other analysis methods, like Location Quotient Analysis, Input-Output Analysis, and Cost Benefit Analysis focus respectively on regional specialization, inter-industry linkages, and evaluating project viability rather than breaking down employment changes in the manner specific to Shift-Share Analysis.