# A.16 – The Specialization Index and the Location Coefficient

#### Author: Dr. Jean-Paul Rodrigue

The specialization index and the location coefficient look at the level of concentration of an activity at a location such as a terminal in relation to a group of locations.

# 1. The Specialization Index

In transport, to find out if a terminal is specialized in the transshipment or the handling of a particular merchandise or if, inversely, it transfers a wide variety of merchandises, a specialization index can be calculated.

The specialization index can be used to know if a facility (e.g. a terminal) is specialized in the handling of a certain type of product (e.g. containers) or if it handles a wide range of merchandises.

As a consequence, such an index is quite versatile and has a variety of applications; it informs geographers on the activities of any type of terminal (port, train, and airport). In the case of an airport terminal, one could ask if a given airport deals with only a single type of flights/passengers (local, national, international, etc.) or if it welcomes several. The specialization index (SI) is calculated using the following formula:

It is the total of squares of tonnage (or monetary value) of each type of merchandise i (ti) handled at a terminal over the square of the total volume tonnage (or monetary value) of merchandise handled at the terminal.

So, if the specialization index tends toward 1, such a result indicates that the terminal is highly diversified. If, inversely, the index tends toward 0, it means that the terminal’s activity is specialized. Thus, the specialization index evaluates the degree of specialization or diversification of a port, an airport, a train station or any type of terminal.

# 2. The Location Coefficient

Some merchandises are often transshipped at particular terminals rather than at others. Thus, the degree of concentration of a certain type of traffic in a terminal (port, airport, train station) compared with the average for all the terminals, can be measured by using the location coefficient.

The location coefficient is the share of traffic occupied by a type of merchandise at a terminal over the share of traffic of the same type of merchandise among the total traffic of all terminals of the same type.

In the field of transportation, the location coefficient (LC) is calculated by using the following formula:

Where Mti is the traffic of a merchandise t at a terminal i, Mt is the total of all merchandises of type t for all terminals and M is the total of all types of merchandises for all terminals.The greater the value of the index, the greater is the degree is the degree of traffic of a certain type of merchandise. Possible outcomes are of three types:

• A figure lower than 1, indicate that the traffic of the chosen merchandise in the terminal is under-represented compared to the same merchandise in all the terminals.
• A figure equal to 1, indicates that the quantity of traffic of the chosen merchandise in a terminal is proportional to its participation to total traffic.
• Finally a coefficient above 1 indicates that the traffic of the chosen merchandise in a given terminal is preponderant in total traffic.

Beside using the location coefficient to evaluate the relative weight of a type of traffic in a terminal to it, the location coefficient can be used to appreciate the importance of an economic activity for a community compared with the importance of the same activity within a defined larger area (e.g.. province, country, world, etc.). The larger geographic entity is also known as the benchmark and is critical in the calculation of the location coefficient.

## Bibliography

• Duncan, O.D and B. Duncan (1995) “A methodological analysis of segregation indexes”, American Sociological Review. Vol. 20, pp. 210-17.