What does the Location Quotient (LQ) measure?

The Location Quotient (LQ) measures the concentration of a particular industry within a local economy in comparison to a larger area, such as a state or national average. This metric is used to determine how specialized a local economy is in a specific industry relative to a broader context.

For instance, an LQ greater than 1 suggests that the industry is more concentrated in the local area compared to the larger reference area, indicating a potential competitive advantage and possibly higher local employment in that industry. Conversely, an LQ less than 1 would signify that the industry is less concentrated locally compared to the larger area, which could indicate fewer resources or job opportunities in that specific sector.

Understanding the LQ is critical for policymakers, business leaders, and economic developers as it provides insight into local economic strengths and weaknesses, helping to inform decisions related to investment, workforce development, and economic strategies.