The location quotient is most frequently used in economic geography and locational analysis, but it has much wider applicability. The location quotient (LQ) is an index for comparing an area's share of a particular activity with the area's share of some basic or aggregate phenomenon. Suppose, for example, that the following data are taken from a larger data set which details the employment structure of a region divided into four areas:
Manufacturing Service Employment % Area E 5 5 40 10 150 15 F 70 70 220 55 500 50 G 15 15 60 15 200 20 H 10 10 80 20 150 15 TOTAL 100 100 400 100 1000 100
Is employment in manufacturing or services concentrated in some area (s), or is it evenly distributed across the map? Location quotients compare the distribution of an activity to some base or standard, in this case to total employment. The question can be re-expressed as follows: Is manufacturing or service employment more or less concentrated than total employment?
DEFINITION: LOCATION QUOTIENT
The location quotient for a given activity for area i is the ratio of the percentage of the total regional activity in area i to the percentage of the total base in area i. If Ai is equal to the level of the activity in area i and Bi is the level of the base, then
LQi = Ai/( Ai / Bi /( Bi
The numerator of Equation (3-1) is the percentage of the activity in area i, and the denominator is the percentage of the base. A location quotient is thus the ratio of two percentages and is therefore dimensionless.
The location quotient for manufacturing in area A is 5/100 (150/1000 = 5/15 = 0.333. That is, region A has 5 percent of the manufacturing employment of the region but 15 percent of the total employment in all sectors. On the basis of its share of total employment, we would expect region A to have 15 percent of the manufacturing employment. It has only 5 percent, or 0.333, as much as would be expected. Location quotients can be interpreted by using the following conventions:
1. If LQ>1, this indicates a relative concentration of the activity in area I, compared to the region as a whole.
2. If LQ =1, the area has a share of the activity in accordance with its share of the base.
3. If LQ<1, the area has less of a share of the activity than is more generally, or regionally, found.
The complete table of location quotients for these two employment sectors indicates which areas of the map fall into these categories:
Area Manufacturing Services A 0.333 0.667 B 1.400 1.100 C 0.750 0.750 D 0.677 1.333
For manufacturing, the location quotients reveal a concentration in area B and less than expected shares in each of the three other areas. For services, however, the distribution is much less concentrated, with relative concentrations in areas B and D and less than expected shares in A and C. Spatial patterns can be revealed by mapping these location quotients.
The selection of the base or standard distribution used in the denominator of location quotients is subject to choice. Usually, if the activities are part of some aggregate, then the aggregate is used as the base. In this example, it makes sense to compare the concentration of various industrial sectors to the total employment in all sectors. However, it is also possible to use area populations as the standard of comparison. In this instance, we would be comparing the a real distribution of sectoral employment to the a real distribution of population. Or, the base activity could also be defined as the actual land area in each of the areas of the region.
*Source: Barber, 1988.