Regional Economics & Urban Planning
Location Quotient & Economic Base Multiplier Formula
Calculate sectoral Location Quotients LQ_i = (E_ir / E_r) / (E_in / E_n), bifurcate Basic export employment MAX(0, E_ir - E_r*(E_in/E_n)), and compute the Economic Base Multiplier.
Identify export-base industries (LQ > 1) and quantify local non-basic job multipliers!
Regional urban planners use Location Quotients (LQ) and Hoyt-Tiebout Economic Base Theory to distinguish "Basic" (export-oriented, externally revenue-bringing) employment from "Non-Basic" (residentiary local-service) employment! Sector i’s Location Quotient compares its share of regional total jobs E_r = SUM(E_ir) to its share of national total jobs E_n = SUM(E_in): LQ_i = (E_ir / E_r) / (E_in / E_n)! Under the Location-Quotient Bifurcation Method, any sector with LQ_i <= 1.00 serves purely local demand (Basic_Jobs_i = 0), whereas any specialized cluster with LQ_i > 1.00 generates Basic Export Jobs equal to the excess over national self-sufficiency: Basic_Jobs_i = MAX(0, E_ir - E_r * (E_in / E_n)) = E_ir * MAX(0, 1 - 1 / LQ_i), yielding Regional Economic Base Multiplier M_base = E_r / SUM(Basic_Jobs_i)!
Verify on exact integers across a 3-sector metro of Total Regional Jobs E_r = 100,000 vs National Jobs E_n = 10,000,000 (1:100 scale): Aerospace_Tech (Regional = 25,000, National = 1,000,000 -> LQ = 0.25 / 0.10 = 2.50 -> Basic Jobs = 25,000 - 10,000 = 15,000), Logistics (Regional = 15,000, National = 1,000,000 -> LQ = 0.15 / 0.10 = 1.50 -> Basic Jobs = 15,000 - 10,000 = 5,000), and Local_Retail_Health (Regional = 60,000, National = 8,000,000 -> LQ = 0.60 / 0.80 = 0.75 -> Basic Jobs = 0): Total Basic Export Employment is 15,000 + 5,000 = 20,000 jobs, and Regional Economic Base Multiplier is 100,000 / 20,000 = 5.0000 (1 basic export job supports 4 local non-basic jobs = 5 total regional jobs!)!
| Economic Base Metric (E_r = 100k, E_n = 10M) | Formula | Verified Output |
|---|---|---|
| Aerospace Cluster LQ (25k vs 1M) | (25,000 / 100,000) / (1M / 10M) | 2.5000 (2.5x National Concentration) |
| Aerospace Basic Export Jobs | MAX(0, 25,000 - 100,000 * 0.10) | 15,000.00 basic jobs |
| Total Metro Basic Employment | SUM(D2:D4) = 15,000 + 5,000 + 0 | 20,000.00 basic jobs |
| Economic Base Multiplier (M_base) | SUM(B2:B4) / SUM(D2:D4) | 5.0000 total jobs / basic job |
Row-Level Sectoral Location Quotient & Basic Employment Formula
Computing Basic_Jobs_i = MAX(0, B2 - SUM($B$2:$B$4) * (C2 / SUM($C$2:$C$4))) avoids intermediate LQ rounding error!
=IF(OR(B2 < 0, C2 <= 0, SUM($B$2:$B$4) <= 0, SUM($C$2:$C$4) <= 0), "Invalid LQ Input", ROUND((B2 / SUM($B$2:$B$4)) / (C2 / SUM($C$2:$C$4)), 4))Regional Economic Base Multiplier M_base Formula
Guard the mirror-economy edge case where regional shares exactly match national shares in every sector (LQ_i = 1 everywhere -> SUM(Basic_Jobs) = 0 -> "No Specialized Export Base")!
=LET(e_rg, SUM(B2:B4), e_bs, SUM(E2:E4), IF(OR(MIN(B2:B4) < 0, MIN(C2:C4) <= 0, e_rg <= 0), "Invalid LQ Input", IF(e_bs <= 0, "No Specialized Export Base", ROUND(e_rg / e_bs, 4))))Try the example
Use the original values or change them to test your understanding.