CARIFORUM and UK EPA Study

Product Concentration (Concentration Index) The product concentration index (PCI, imports) estimates the degree of import concentration—the degree to which imports are concentrated on some products—at the country level (UNCTAD Stats). A high import concentration on one commodity could make a country highly susceptible to international price volatility and/or supply. Concentration can also generate foreign exchange risks when productive capacity is low. However, high global integration can also generate low concentration when the supply of imported goods is well diversified, highlighting some ambiguity or imprecision in interpretation, especially for developed economies that espouse low levels of import concentration that are attributable to integration. The indicator of concentration is defined as a normalized Herfindhal-Hirschman index (HHI) of product concentration of merchandise imports at the country level: where H j is the product concentration index of the exports of the jth country, M i,j is for the ith product from the jth country, N is for the number of products imported at the three-digit level of the SITC Revision 3. The index ranges from 0 to 1, with larger values denoting higher level of import concentration [ value of 1 means that all imports of the jth country are accounted for by a single commodity, while 0 implies that country j’s imports are homogeneously distributed among all products (UNCTAD/ STAT/IE/2019/2, p.4).69 Product Diversification (Diversification Index) The diversity of an economy’s exports and its export performance reveal to what extent a country is able to compete in global markets. They are also indicators of the country’s capacity to 2 , i j M M N ö - ÷ ÷ 1 1 ; 1 1 N å i j j H N = æ ç ç è ø = -

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STAT/IE/2019/2https://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx

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