Indicators for the Post 2015 Development Agenda
The Post 2015 development agenda for sustainable development is taking shape around three pillars:
Economic development, social inclusion and environmental sustainability.
Indicators proposed by DMD/MAR focus on economic development while accounting for inclusiveness
and sustainability. The largest untapped source of growth is entrepreneurship. Inclusive growth means
employment possibilities in developing countries, fragile states, post conflict countries, land-locked
countries and small island developing states (SIDs) also for the marginalised parts of the population.
Sustainable growth means increasing and predictable incomes resulting from value-added products
instead of from finite natural resources or raw commodities that are often subject to volatile prices and
revenues. This requires good governance and open markets, strong trade support institutions and
growth in the services as well as in the goods sector – conditions that foster a country’s ability to tap
into new, potentially higher value-added export opportunities eventually improving its
competitiveness. Inclusive and sustainable economic development is thus an engine for the economic
empowerment of individuals – with successful and expanding entrepreneurship creating jobs and
increasing incomes that in turn contribute to eradicating poverty.
To achieve inclusive and sustainable economic growth, foster entrepreneurship and the integration of
SMEs into global value chains, attention will be given to:
1. Ability of countries to diversify. Aid for Trade can be directed to build capacity and provide
SMEs with required support to spot and leverage opportunities to diversify into the supply and
exports of new goods and to target new markets. This will help SMEs integrate into exportoriented value chains at the national level and thereby create new employment and income
opportunities for the poor.
2. Ability of a country to capture a greater part of value-added production. Aid for Trade
programmes should be designed in a way that they favour value-added sectors such as the
service sector. Improvements in infrastructure and in customs efficiency for example have the
potential to benefit the production of services. Value-added sectors will provide better jobs and
increasing, steady incomes to the population in developing and least developed countries.
3. Improve a country’s competitiveness. Taking advantage of new and better export
opportunities will allow SMEs and hence entire industries and countries to become more
competitive internationally and thus to capture a bigger share of global markets.
Indicators to measure progress could drill down in (please see the technical appendix for details):
1. Export diversification: This indicator measures the number of export products and the
number of destination markets.
2. Technological advancement: This indicator observes export patterns to infer about the
technology used in the production processes of countries.
3. Positioning in the global value chain: This indicator assesses the share of goods exports at
various processing stages and the share of service exports to learn about the position of a
country in the global value chain.
4. Country competitiveness: This indicator monitors the changing performance of countries in
terms of market shares.
Establishing collaborative partnerships is the way forward to build a base on which the Post 2015
agenda can be developed and delivered. This means increased engagement with the private sector as
ITC seeks opportunities to integrate SMEs into global value chains that characterise the multilateral
trading system.
Technical Annex
1. Diversification indicator
The number of equivalent products and markets is calculated as the inverse of the Herfindahl index
(which measures concentration) to derive the number of markets and products assuming that each
market and product absorbs the same share of total trade of a country. The higher the concentration on
a few markets and products, the lower will be the number of equivalent markets and products, and the
lower will hence be the diversification of that country.
Diversification will be calculated at the country-level and for various country groups (LDCs, LLDCs,
developing countries, BRICs, etc.) over time (starting from 2001) as well as compared to a benchmark
group (developed countries). Calculations can be done overall as well as separately for each MDG sector
(agriculture, clothing, textiles and manufacturing).
Table 1: Evolution of diversification over time
Indicator
Description
1a-Product
diversification
N° of equivalent products* (inverse of the
Herfindahl Index for products (𝐻𝐼𝑃𝑡 ))
 𝑝- product
 𝑡- time
1b-Market
diversification
N° of equivalent markets* (inverse of the
Herfindahl Index for markets (𝐻𝐼𝑀 𝑡 ))
 𝑚- market
Mathematical definition
1
𝑁° 𝑒𝑞. 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑠 𝑡 =
𝐻𝐼𝑃 𝑡
2
𝑃
X𝑝𝑡
𝐻𝐼𝑃𝑡 = ∑
( 𝑡)
𝑝=1 𝑋
1
𝑁° 𝑒𝑞. 𝑚𝑎𝑟𝑘𝑒𝑡𝑠 𝑡 =
𝐻𝐼𝑀𝑡
𝑡 2
𝑀
X𝑚
𝐻𝐼𝑀𝑡 = ∑
( 𝑡)
𝑚=1 𝑋
Figure: Example of results for diversification indicator (1a and 1b)
Equivalent no. of products
80
Equivalent no. of markets
20
18
16
14
12
10
8
6
4
2
0
70
60
50
40
30
20
10
0
Dvpd
LLDC
Dvpg
BRICS
LDC
Dvpd
LLDC
Dvpg
BRICS
LDC
Equivalent no. of products (no oil)
90
80
70
60
50
40
30
20
10
0
Equivalent no. of markets (no oil)
20
18
16
14
12
10
8
6
4
2
0
Dvpd
LLDC
Dvpg
BRICS
LDC
Dvpd
LLDC
Dvpg
BRICS
LDC
2. Technological advancement indicator
Hausmann, Hidalgo et al. propose complexity indices based on the idea that information on the
technology used by a country is embedded in the observed production pattern of that country and in
the production patterns of all other countries. It comprises two concepts:


Diversity: no. of products a country can make (complex countries are more diverse)
Ubiquity: no. of countries that make a product (complex products are less ubiquitous)
The underlying intuition suggests that if a country is highly diversified and produces goods that are
produced in only few other countries, then the country in question is likely to have high economic
complexity; conversely, if it is little diversified and many other countries are able to make the products
the country in question produces, it is likely to have a low economic complexity. The measures of
diversity and ubiquity thereby correct each other in an iterative process until convergence is obtained.
Take the example of rare resources, like diamonds. Few countries will produce diamonds, and
consequently ubiquity will be low, hinting towards a high economic complexity of the country in
question. However, the diversity of the countries that produce diamonds is likely to be low and the
ubiquity of all other products these countries produce is likely to be high. Eventually, the iterative
process will correct the initial impression of high complexity.
Transferring the concept from production to trade patterns requires some additional treatment of the
data. Because some countries may simply re-export complex goods without actually producing them,
we will only consider continuous exports exceeding a certain threshold.
Again, calculations will be made for different country groups over time and as compared to a
benchmark.
Table 2: Economic complexity of countries
Indicator
2-Economic
Complexity Index
for countries (EPI)
Description
Iterative process with the average ubiquity of the
products that a country exports and the average
diversity of the countries that export those
products and so forth.
 𝑀𝑐𝑝 - a matrix that is 1 if country c produces
product p, and 0 otherwise
Mathematical definition
1
𝑡
𝑡
𝑡
𝑘𝑐,𝑁
= 𝑡 ∑ 𝑀𝑐𝑝
𝑘𝑝,𝑁−1
𝑘𝑐,0
𝑝
𝑡
𝑘𝑝,𝑁−1
where
1
𝑡
𝑡
= 𝑡 ∑ 𝑀𝑐′𝑝
𝑘𝑐′,𝑁−2
𝑘𝑝,0
𝑐′
3. Value chain indicator
The status and the evolution of value-added industries in developing countries can be broadly assessed
by looking at the share of goods exports by processing stage as well as the share of service exports in
total exports.
We make use of an ITC classification of processing stages (raw, semi-processed, and processed) defined
at the 6-digit level of the Harmonized System (HS) classification. Assuming that all (semi-)processed
exports have been transformed within the country, any increase in the export share of transformed
goods can be interpreted as the growth of processing, and thus value-added industries, for exporting. In
the same spirit, a growing share of service exports in total exports will be conducive to a country’s
move up the global value chain.
As before, the calculations can be done for various country groups and compared to a benchmark.
Table 3: Share of processed goods and services exports
Indicator
Description
Mathematical definition
3a-Share of goods
exports by
processing level
Share of a country’s goods exports by processing
level in total exports over time; indicating the set
up of value-added industries for exporting.
∑𝑝∈(𝑠𝑒𝑚𝑖−𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑒𝑑,𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑒𝑑) 𝑋𝑝𝑡
∑𝑝 𝑋𝑝𝑡
3b-Share of
services exports
Share of a country’s services exports in total
exports over time; indicating the set up of valueadded industries for exporting.
∑𝑠𝑒𝑟𝑣𝑖𝑐𝑒𝑠 𝑋𝑠𝑡
𝑡
∑𝑝𝑠 𝑋𝑝𝑠
Figure: Example of results for value chain indicator (3a)
Share of processed exports
Share of processed exports (no
oil)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
4.
Dvpd
LLDC
Dvpg
BRICS
LDC
Dvpd
LLDC
Dvpg
BRICS
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
LDC
Competitiveness indicator
Constant market share analysis is used to monitor the changing performance of a country (in a sector or
in a region). It can be decomposed in a structural and a competitiveness effect. Defined as the weighted
average of the growth in market shares (where the weights are the country’s initial shares of its exports
of a product to a destination market), the competitiveness effect captures the gain or loss in market
share that would come about if the export structure were to remain unchanged.
The competitiveness effect can be calculated overall and for the four MDG sectors. The indicator allows
for cross-country comparisons as well as comparisons over time.
Table 4: Decomposition of changes in world market share
Indicator
4-Competitiveness
effect (%)
Description
Weighted average of the growth in market
shares
 𝑔(∗) - percentage change in country’s
(world) exports between 𝑡 and 𝑡0
Mathematical definition
𝑡
∑∑
𝑝
𝑚
0
𝑋𝑝𝑚
∗
(𝑔 − 𝑔𝑝𝑚
)
𝑋𝑡0 𝑝𝑚