Industry Concentration with Location Quotients
Location Quotient (LQ) is a ratio of the relative distribution of industry employment in a region to that industry’s distribution in a larger economy. Industry concentration analysis using location quotients (LQ) helps identify the industries that are more specialized in an area. Businesses that are more specialized due to exporting goods and services, or because they draw customers in from outside the state, are important sources of new income for an area. A high LQ for an industry indicates that the industry is more specialized, and employment is more concentrated for that industry in the state compared to the United States. This could be because that industry is more export oriented or is drawing customers into the state.
An LQ greater than 1 indicates that the industry is more specialized, and employment is more concentrated for that industry in the region, as compared to the United States as a whole. An LQ less than 1 indicates that the industry is less specialized, and employment is less concentrated. An LQ of 2 would mean that the industry’s employment is twice as concentrated in the region, as compared to the United States.