Mapping Maryland’s Comparative Advantages: A New Blog Series

Here at the Regional Economic Studies Institute (RESI) at Towson University, we take pride in understanding Maryland’s economy. For the last 25 years, our team has worked with public, private, and non-profit clients to provide a range of economic and policy analysis services. But a big part of our mission is public outreach and sharing our knowledge with you to help you make better informed decisions for your community, your business, or your family. Every month, our Chief Economist, Dr. Daraius Irani, publishes an update on the employment situation in Maryland. For example, here’s a closer look at the employment numbers released in January 2017. To continue helping you better understand Maryland’s complex economic landscape, we’re proud to announce the launch of a new blog series called “Mapping Maryland’s Comparative Advantages.”

Maryland has been called “America in Miniature,” and there is a lot of truth in the statement; Maryland has mountains, ocean coasts, dense urban areas, and productive farmland. This diversity makes Maryland a great place to live and travel, but it also means that statewide economic numbers can be misleading. What’s true in Baltimore or the Washington, D.C. suburbs is not necessarily true for Allegany County or Somerset County. To better understand what’s driving Maryland’s economy, this blog series will delve into county-level economic data available from the US Bureau of Labor Statistics (BLS), specifically the BLS Quarterly Census of Employment and Wages (QCEW).

Understanding Location Quotients

To understand what industries Maryland has a comparative advantage in, this blog series will look at location quotients reported in QCEW data. Location quotients compare the employment in a local industry with the employment in that industry nationwide. For example, if we wanted to look at the location quotient for crabbing in Maryland, we’d use the following ratio to figure that out:

But what does this ratio actually tell us? If the location quotient for crabbing is exactly 1, it means that the same proportion of people work in the crabbing industry in Maryland as do across the country. If the ratio is above 1, it indicates that Maryland is likely meeting all of the local demand for crab and is exporting crabs to other areas of the country. If the location quotient is below 1, it means that Maryland likely can’t produce enough crabs to feed all Marylanders, and so we have to import crabs from other parts of the country.

Because there will always be a lot of noise in this data, location quotients barely above or below one typically aren’t thought of as strictly importing or exporting businesses. A location quotient above 1.25 is typically the threshold economists look for when identifying industries Maryland or other areas export to the rest of the country. There’s usually a reason for higher location quotients, such as an abundance of natural resources, a highly-skilled workforce, or different state and local policies. These reasons create a comparative advantage for that industry, allowing the industry to outcompete firms across the country.

Maryland’s Top Location Quotients

This blog series will look at the top industries in Maryland at the 4-digit NAICS code level and how they are distributed across the state. The table below shows the 15 Maryland industries with the highest location quotients.

4-Digit NAICS Code Industry Name Location Quotient in 2015 Location Quotient in 2011 Average Wage in 2015
5417 Scientific research and development services 2.70 2.63  $104,704
5259 Other investment pools and funds 2.67 0.38  $217,312
7132 Gambling industries 2.37 0.38  $35,759
5251 Insurance and employee benefit funds 2.23 1.62  $56,871
4851 Urban transit systems 2.14 1.05  $36,122
3379 Other furniture related product manufacturing 2.06 1.65  $39,106
4453 Beer, wine, and liquor stores 1.97 2.10  $25,750
5415 Computer systems design and related services 1.97 2.19  $110,196
3342 Communications equipment manufacturing 1.91 1.91  $101,273
4832 Inland water transportation 1.83 1.34  $83,957
5152 Cable and other subscription programming 1.83 1.39  $131,193
6117 Educational support services 1.66 1.63  $64,701
5416 Management and technical consulting services 1.61 1.67  $92,084
8141 Private households 1.61 0.72  $24,003
4855 Charter bus industry 1.61 1.37  $34,139

 

Our next blog post will take a look at the Scientific Research and Development Services Industry which is the industry in Maryland with the highest location quotient. We’ll break out where this industry is strongest in the state and talk about why Maryland has such a comparative advantage in this industry. We’ll also use RESI’s proprietary Predictive Regional Occupation Matrix (PROM) tool to look at what occupations are the most affected by Scientific R&D Services across the state, as well as what the education requirements for these jobs are. As a sneak peak, here’s a map showing the location quotients for Scientific R&D Services for each county in Maryland:

Mapping Maryland’s Comparative Advantages

Map showing the location quotients for Scientific R&D Services for each county in Maryland.

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Michael Siers
Michael Siers is a senior economist at the Regional Economics Studies Institute. He is charged with designing qualitative and quantitative research methodologies to better understand impacts to the Maryland and regional economies. Michael's posts focus on RESI projects.