The Location Quotient Approach to Estimating Regional Economic Impacts

This article presents a theoretical rationale for the use of location quotients in estimating regional economic impacts. Then it suggests a number of procedural modifications which are consistent with that underlying rationale. Two of the modifications are implemented and are shown to improve the accuracy of the multiplier. Previous empirical work, often cited as evidence of the inaccuracy of the location quotient approach, is found to be questionable itself. The paper concludes, in part, that the location quotient approach can be a useful planning tool.