Measuring and Analyzing Economic Diversification Using the Herfindahl-Hirschman Index

Abstract

       This study aims to analyze and measure economic diversification using the Herfindahl-Hirschman Index (HHI), focusing on the Algerian economy from 2019 to 2023. A descriptive analytical approach was adopted to review previous studies and present the current state of diversification in the Algerian economy, alongside the policies and efforts undertaken by the government. The study revealed that the HHI values for the period from 2019 to 2023 ranged between 0.2 and 0.4, indicating a moderate level of economic diversification in Algeria, as the economy continues to move away from its dependence on the hydrocarbons sector. Additionally, the study calculated the commodity diversification index, which consistently showed values close to 1, indicating a lack of diversification in Algerian exports. The export capacity index was also calculated, with values ranging from 1.2% to 3.1%, reflecting the weak contribution of non-hydrocarbon exports. Consequently, it can be concluded that the Algerian government's policies, under the 2016-2030 vision to promote economic diversification, have yet to yield tangible results, despite several years of implementation focused on boosting non-hydrocarbon sectors.