global economic diversification index

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About the Edi

The Mohammed Bin Rashid School of Government (MBRSG) is launching the Global Economic Diversification Index (EDI) to assess the level of economic diversification in countries around the world and rank them based on their status and progress. The Global EDI aims to understand the nature of economic diversification and the factors that directly or indirectly impact a country’s overall level of diversification. The Index prioritises objectivity and accuracy and, as such, is based solely on quantitative measures. It aims to provides a quantitative benchmark and rank countries’ economic diversification efforts.

2021 Edition

Production Diversification

Indicators under this category look into how diversified economies are across commodity and non-commodity sectors, products, services and activities. Especially in the oil-exporting nations of the region, output is skewed towards energy-intensive/ dependent activities – government plays a large role, and the role of the private sector is restricted. The main source for data in this category is the World Bank’s World Development Indicators dataset (unless specified otherwise).

2021 Edition

Trade diversification

Many countries pursue protectionist policies that can lead to economic activity diversification, through tariffs, restrictive quotas, subsidies and other domestic content policies favouring domestic production and activity. However, protected industries become highly dependent on the domestic, captured, market and are not able to compete internationally. By contrast, countries that have successfully diversified have a diversified export basket.

2021 Edition

Government revenue diversification

Countries with limited economic diversification typically also have a highly concentrated government revenue (tax and non-tax) structures, with a high dependence on limited sources of revenue, such as trade and natural resource taxation. A high dependence on a limited source such as natural resource revenues expose public finances to volatility and uncertainty, undermines fiscal sustainability and leads to a pro-cyclical bias of fiscal policy.

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