Economic Growth Analysis of Six Divisions of Bangladesh Using Location Quotient and Shift-Share Method

The structure and performance of industrial sectors of a region is an impelling factor in determining the growth of a region’s economy. In Bangladesh, a great heterogeneity in economic growth exists among different regions along with the administrative divisions. This study investigates the short run and long run spatio-temporal variation of regional economies of the six divisions of Bangladesh. Location Quotient and Shift share method have been employed with gross divisional product and gross domestic product at constant price for the year 1995-96 to 1999-2000 as parameter. The comparative analysis of the six divisions reveals that Fishing and Construction sector have been the most flourishing industries and Real Estate, Renting and Business activities has been lagging for all the six divisions during the timeframe. Barisal district is in economic malaise relative to the other divisions and hence requires special attention to be in pace of consistent economic growth. Introduction The economy of a region predominantly depends on the strength and weakness of different industries existing within it, the dynamics of industrial structure and its unique regional factors. Spatial inequality is prevalent across different regions of Bangladesh in terms of economic growth and development (Rahman, 2005: 31).Geographic and locational aspects are the paramount underlying factors contributing in the flourishing of different sectors in particular regions. The six divisions of this study are enriched in different sectors due to geographical and administrative factors. Dhaka, being the capital and administrative hub of the country mainly specializes in secondary and tertiary activities whereas Rajshahi division’s economic base is mainly dependent on agriculture (Hossain, 2013: 370; BBS, 2013a:7). Fishing is the most thriving sector in Khulna, Chittagong and Barisal because of the entwining rivers, canals and the Bay of Bengal at the southern coasts (BBS, 2013b:6; BBS, 2013c:6; BBS, 2013d:6 ). Sylhet relies on stone quarrying and mining for its economic base. Many stone quarrying mines are there in Bholagonj, Jaflong, Ballaghat and Bicknakandi of Sylhet and many gas wells also exist there (Khoda, 2007: 1;Haq and Gomes, 2001: 154). * Research Assistant, Department of Urban and Regional Planning, BUET ** Graduate Student, Department of Urban and Regional Planning, BUET, *** Lecturer, Department of Urban and Regional Planning, BUET **** Associate Professor, Department of URP, BUET 136 Journal of Bangladesh Institute of Planners, Vol. 8, 2015 This paper tries to identify if the distribution of GDP in different sectors of the divisions actually complies with these locational attributes in the stated timeframe (1995-2000). It also attempts to explore the regional variation in distribution of GDP in six divisions with a view to identifying the thriving and lagging sectors and also quantifies how much of the growth of an industry of a region is attributable to national growth and how much is proliferated by locational factors. Literature Review Location Quotient and Shift Share method are two simple and widely popular techniques for regional development giving pertinent insights into economic changes (Hodgkinson, 2005: 299). Location Quotient is a method for short run regional analysis of economic structure of a region which helps to quantify how concentrated a particular industry, cluster or occupation is in a region compared to the nation (Mack and Jacobson, 1996: 6). On the other hand, shift share analysis proposed by Dunn (1960), is used to decompose variations in different economic indicators. With this method it can be ascertained how much of regional growth can be attributed to national trends and how much is due to unique regional factors (Esteban, 1999: 4). In Shift Share method of long run regional analysis, economic growth is explained by the combined effect of two components: shift component and share component. National share component explains how much of the regional industry’s growth is explained by the overall growth of the national economy. If the entire economy is uprising, there should be positive change in each industry in local regions also. Shift components are deviations in regional economic growth from the national share. The shift components sort out the exogenous and endogenous factors triggering the regional growth. The shift component can be subcategorized as Proportionality shift component and Differential shift component. Proportionality shift component (also known as Structural or Industrial Mix Component)identifies fast growing or slow growing industrial sectors in a local area based on the national growth rates for individual industrial sectors. The component is positive in areas specializing in nationally fast growing sectors and negative in areas specializing in nationally slow growing sectors. The leading and lagging industries of the region can be sorted out which have positive and negative differential shift components respectively. A region with locational advantage for a specific industry would yield positive differential component and vice versa (Glasson, 1974:92). Kiser (1992:24) used Location Quotient technique and Shift Share method for the analysis of regional economies of Texas. For Location Quotient, average annual employment of 1991 and U.S. employment data for the same time period were used and for Shift Share analysis, the period 1988 to 1991 was examined using average annual employment data for the regions. Diniz and Upadhay (2010:105) conducted a thorough research of the spatiotemporal relationship between specialization, productivity and development of Indian productive structures using Location Quotient in 2006. Morrissey (2014:1) used a relatively novel LQ approach for exploring regional industrial specialization in Ireland. A cut-off value of 1.25 or above was used as an indicator of industrial specialization and clustering. Economic Growth Analysis of Six Divisions of Bangladesh Using Location Quotient 137 Though the investigation of economic growth pattern of six divisions is important an issue, there has not yet been any such study focusing on short run and long run regional analysis of major industrial sectors of Bangladesh. This study is oriented to formulate a concrete analysis of the deteriorating sectors for each region in short run and long run and to articulate a comparative scenario of the regions in this context. Analysis of Economic Growth Pattern of the Divisions Scenario of Basic Sectors in Different Divisions From the analysis of Location Quotient, basic and non-basic sectors for each of the divisions are sorted out. Then the Economic Base Multiplier is calculated for each division. The analysis mainly focuses on the basic sectors of different divisions because these sectors have export orientation, which contribute to increasing GDP for that particular division. Table 1: Gross Divisional Product by Industry at Constant Market Prices, 1999-2000 Divisions Economic Sectors GDP in Million TK Barisal Chittagong Dhaka Khulna Rajshahi Sylhet Agriculture and Forestry 28136 61664 96549 57823 115156 25342 Fishing 16408 33461 2709