Economic diversification
Economic diversification plays a major role in the country’s prosperity and recovery, and contributes significantly to creating job and investment opportunities, which positively reflects on societal welfare. There are approved indicators that indicate economic diversification, and in this article we review the most prominent of these indicators.
What is the concept of economic diversification?
Economists have developed a set of definitions related to economic diversification. Attaran defined economic diversification based on the industries produced by a particular country, and defined it as the presence of a large and diverse number of industrial sectors in a country. As for oil-producing countries, Attaran indicated that economic diversification should not depend on oil production alone, but should include multiple industrial sectors. In general, economic diversification means introducing changes that include the economic, social, and production sectors, with the aim of introducing new and balanced sources to the countries’ economy, and thus achieving Community welfare.[١][٢]
What are the indicators of economic diversification?
Economic diversification generally aims to increase the weight of the state at the global level, as it contributes to making the state economically independent, as economic diversification creates new job opportunities, and contributes effectively to the development of neglected sectors, which is reflected in the prosperity of the state and frees it from dependence and reliance on foreign aid and investments. The following are the most prominent indicators of economic diversification:[٣][٤]
Ownership Index
indicates Concept The ownership index refers to the major contributor to the economy and ownership of production sectors. The ownership index is divided into two sections: the first section is concerned with the state, where the state plays a regulatory role in managing the production market and the economy. Its role includes eliminating monopolies, setting important rules regarding the concept of production market failure, and protecting consumers and producers. The state’s major regulatory role is highlighted in that it prevents major producers from dominating markets by setting rules that ensure equal opportunities for all producers. The second section of the ownership index is the private sector section, and the role of the private sector is represented in the ability to move between global markets efficiently. It is worth noting that the role of the private sector in managing and practicing the economy makes economic diversification greater.
Economic Sector Interconnectedness Index
The concept of interconnected economic sectors refers to the extent to which the large and dominant economic sectors in the country are in harmony with the smaller sectors in their contribution to the economic activity as a whole. It also refers to the necessity and guarantee of the effectiveness of all economic sectors in contributing to the economy, as the methods of independence adopted by the dominant sectors in the country lead to the marginalization of the small sectors and their complete absence from the economic arena. In order for economic diversification to occur, all sectors must participate in economic nutrition.
Economic variables index
Economic variables mean the gross domestic product, public revenues, exports, and imports. These four variables contribute significantly to knowing the extent of economic diversification in the country. For example, the gross domestic product is based on all sectors in the country, such as; service, production, and distribution sectors. If the contribution of one sector increases over another, this indicates a lack of economic diversification. This applies to the rest of the variables. In order for economic diversification to occur, exported goods must increase and diversify, and vice versa for imported goods, as the large volume of imports indicates the absence or deficiency of economic diversification.
the reviewer
- ↑ “Economic diversification”, unfccc, Retrieved 5/4/2022. Edited.
- ↑ “Economic Diversification “, worldbankgroup, Retrieved 5/4/2022. Edited.
- ↑ “Economic diversification: A priority for action, now more than ever”, blogs.worldbank, Retrieved 5/4/2022. Edited.
- ↑ “What Drives Successful Economic Diversification in Resource-Rich Countries?”, academic, Retrieved 5/4/2022. Edited.
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