A Study of Kentucky’s Agricultural Performance Using Shift-Share Analysts

In this paper the theory that Kentucky has a comparative advantage in agricultural employment, when compared to the United States, is examined. In order to test this hypothesis, a dynamic shift-share analysis was conducted using the thirteen major economic sector of Kentucky over the period 1970 to 1989. The resulting regional shift components, or competitive components, give support to the theory that a comparative advantage for Kentucky in agriculture does exist. Annual regional shift components, as well as their dynamic counterpart, possess predominately positive values, indicating outperformance by Kentucky’s agricultural sector when compared to the United States economy as a whole. Over the past few decades, the United States, as well as most other industrial nations, has experienced a dramatic decrease in employment in the agricultural sector of the economy. This employment shift has been accompanied by increased employment in the other sectors, such as manufacturing and services. The purpose of this thesis is to determine whether Kentucky has followed the same developmental trends as the United States, or has followed its own trends. If Kentucky has, indeed, followed its own trends, then what implications could this have on future development, as well as state developmental policy? In this paper, Kentucky’s developmental trends will be examined using dynamic shift-share analysis as a means of comparison. The first section provides a review of the relevant literature to support and explain the theory. Section two contains a discussion of the methodology and mechanics of shift-share analysis. The third section presents the data used, as well as a discussion of the methodology utilized in the analysis. Both the raw results and interpretations of these results are presented in section four. Finally, section five offers a summary and conclusions based on the empirical work