Archive:Labour market sector specialisation at regional level

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Data from March 2010, most recent data: Further Eurostat information, Main tables and Database.

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<Introduction: simple language, not too long, kind of executive summary>

Main statistical findings

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Regional sector specialisation

Regional sector specialisation is broadly understood to be the extent to which particular economic sectors attract larger shares of employment or output in one region as compared with another.

The sectoral composition of the regional economy affects employment patterns in several ways. For example, sectors have different rates of growth in production and demand, different employment intensities, different regulations and policies, different capital intensity or different patterns of technological change. All of these factors will influence employment in each sector differently.

Two regions belonging to the same country with similar macroeconomic conditions can have different employment patterns which can be partly explained by their degree of specialisation in the different sectors.

Regions have differing degrees of sector specialisation and, therefore, a comparison of regional labour markets which takes into account their sector composition can shed some light on the analysis.

In order to take into account the degree of sector specialisation, the first question to answer is about how this factor can be measured in a given region.

Several approaches are found in the literature, but probably the most widely used is the location quotient approach, which compares the local economy with a reference economy, in an attempt to identify specialisations in the former. The location quotient is defined as the ratio between the share of regional employment in one sector and the share of employment in that same sector in the reference economy.

The reference economy could be either the EU as a whole or the national economy of which that region is part. In this text, each region is compared with its respective country, since there are different levels of technology in the various Member States, which entail different employment intensities for the same sector in different countries. As such, comparing regions with the EU average would take precedence over the different levels of technology. This choice between EU economy and national economy inevitably gave rise to a new problem, namely that it is impossible to compute the location quotients for Member States with a single NUTS 2 region, like Luxembourg or Malta. Further on in the text, we will postulate a different approach to deal with these Member States.

The location quotient for a specific sector and a specific region is greater than 1.0 when employment in that sector tends to be over-represented in that region, and is therefore regarded as being specialised in that sector. If the location quotient is less than 1.0, local employment is less than is expected for that given sector. Therefore, that sector is not even meeting the local demands for the particular goods or services.

The underlying data used to cluster regions according the degree of specialisation are data on employment by economic activity, at NUTS levels 1 and 2 according to NACE Rev. 1.1. This is not the most recent version of NACE (the statistical classification of economic activities in the European Community), but since only three sectors were used (agriculture and fisheries, industry and services) there are no significant changes to the most recent version. In addition, longer time series are available in the old NACE classification at regional level.

The Labour Force Survey measures resident employment. For regions with high levels of commuters, i.e. employed persons who work in a different region from where they live, the location quotient based on resident employment may be quite different from the one obtained using domestic employment. Nevertheless, three things attenuate this difference in the analysis that is being carried out. First, there is, in general, a very high share of persons who work in the same NUTS 2 region as that in which they live. Second, only three sectors are taken into account (a more detailed analysis would be more exposed to the fact that resident employment is being used instead of domestic employment). Third, the purpose of the exercise is to create only a rough and approximate classification that should not be taken as a definitive indicator of sector specialisation.

Subdivision 2

Data sources and availability

Context

Further Eurostat information

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