1. The Coefficient

Certain kinds of merchandise 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.

2. Example

Lets consider the international traffic of crude petroleum handled at the port of Montreal, in relation to the international traffic of crude petroleum for the Canadian port system as a whole.

Source: Statistics Canada, Cat. No. 54-205.

Results indicate a coefficient lower than 1, suggesting that the international traffic of crude petroleum at the port of Montreal is under-represented when confronted to average figures for the Canadian port system as a whole.

• Click here to download the above table (Excel 5.0).