Identifying Export Industries Using Parametric Density Functions

In this article, the authors present a new way of identifying the set of industries that may constitute a region’s economic base. The authors focus on the differences among regions in their regional employment shares (the percentage of total employment in a particular region attributable to a particular industry). They find that the distribution across regions of regional employment shares can be characterized by what they call a mixed-exponential distribution for industries that are easy to classify as being export industries—such as automotive manufacturing—while the distributions of regional employment shares for some easy-to-classify local industries tend to be normal. The authors then attempt to classify each of the remaining industries as being either export or local to determine whether the empirical distribution of employment shares in each industry is more like the mixed-exponential distribution or more like the normal distribution. The attempt is partially successful.