MODIFIED LQ AND DYNAMIC ECONOMIC BASE

Abstract

Economic Base is an important concept in the regional development planning. This paper
consists of three parts; theory, analytical tool and case studies of regional economic base. Firstly,
we review the theory and various empirical measures of economic base. Location Quotient (LQ) is
commonly used in the empirical works in regional economic planning i.e. economic base.
Secondly, we point out some shortcomings in LQ as an analytical tool for economic base. Based
on works of Vollrath (1991), Laursen (1998) and Dalumn et al (1998), Wörz (2005), we propose a
modified version of LQ, namely symmetric LQ (SLQ), which is suitable for analyzing dynamic
specialization using econometric models. Thirdly, we apply the analytical tool to analyze the
dynamics of economic base in the cases of districts in Special Region of Yogyakarta, Indonesia.
Key words: Symmetric Location Quotient, Dynamic Economic Base. JEL Classification: R10; R11, R12.