Page 24 - Special Topic Session (STS) - Volume 2

STS452 Joerg B.
Herfindahl-Hirschman Index of industry diversification for ASEAN
countries, 1970–2017

Data from: National Accounts Estimates of Main Aggregates—United Nations
Statistics Division.
Note: Index values were calculated based on data from the following seven industries:
agriculture, hunting, forestry and fishing; mining and utilities; manufacturing;
construction; wholesale and retail trade, restaurants and hotels; transport, storage, and
communication; and other activities.
Economic diversification means the diversification of exports, imports, and
domestic production away from extreme dependence on a single dominant
industry or a few natural-resource-based products, as well as a change toward
increased complexity and quality of output (Beutel, 2012).
The Herfindahl-Hirschman index is the most-widely used measure to
evaluate market concentration and diversification of an economy. The index is
the sum of squared shares of the various industries in gross value added. In
the normalized form, the index varies from 0 to 1. In case of a low value, the
economy has a large number of industries with similar value added shares
indicating high diversity. If the index reaches 1, only one sector accounts for
all value added and a high concentration of economic activity is in place. The
decline of the index signifies less concentration in the dominant industry and
greater diversification of other industries. The figure below plots the index for
recent decades for ASEAN countries.
During the last 47 Years all ASEAN countries except Singapore increased
the diversification of industries. From 1990 onwards high and stable levels of
diversification are reported for four countries: Indonesia, Malaysia, Philippines

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