An Alternative for Indicators that Characterize the Structure of Economic Systems

Abstract

Studies on the structure of economic systems are, most frequently, carried out by the methods of informational statistics. These methods, often accompanied by a broad range of indicators (Shannon entropy, Balassa coefficient, Herfindahl specialty index, Gini coefficient, Theil index, etc.) around which a wide literature has been created over time, have a major disadvantage. Their weakness is related to the imposition of the system condition, which indicates the need to know all of the components of the system (as absolute values or as weights). This restriction is difficult to accomplish in some situations, while in others this knowledge may be irrelevant, especially when there is an interest in structural changes only in some of the components of the economic system (either we refer to the typology of economic activities—NACE, or of territorial units—Nomenclature of territorial units for statistics (NUTS)). This article presents a procedure for characterizing the structure of a system and for comparing its evolution over time, in the case of incomplete information, thus eliminating the restriction existent in the classical methods. The proposed methodological alternative uses a parametric distribution, with sub-unit values for the variable. The application refers to Gross Domestic Product values for five of the 28 European Union countries, with annual values of over 1000 billion Euros (Germany, Spain, France, Italy, and United Kingdom) for the years 2003 and 2015. A form of the Wald sequential test is applied to measure changes in the structure of this group of countries, between the years compared. The results of this application validate the proposed method.