Diversification of the economy in the context of globalization (case of Azerbaijan)

Esmira Ahmadova,Leyla Hajiyeva,Lala Hamidova,T Kliestik

doi:10.1051/shsconf/20219207002

Esmira Ahmadova, Leyla Hajiyeva + Show 2 more

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https://doi.org/10.1051/shsconf/20219207002

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Abstract

Research background:Azerbaijan, as a country with rich mineral resources, faces macroeconomic difficulties due to income instability. In 2011-2013, during the period of high world oil prices, Azerbaijan began to diversify the economy and develop the non-oil sector at the expense of oil and gas export revenues. The need to diversify the economy and export has become especially important in the conditions of increased global competition and the integration of the national economy into the world economy.Purpose of the article:The aim of the issue is assessment and study the characteristics of diversification of the economy of Azerbaijan, analyze the dependence of the country’s economic development on the degree of diversification of its economy and exports, assess the level of economic diversification of the country.Methods:To measure the level of diversification, we used indicators such as Herfindahl-Hirschmann export diversification index, and industry concentration in GDP. The originality and value of the research lies in revelation a number of indicators specific to the Azerbaijani economy that affect economic growth based on correlation-regression analysis and other econometric methods. According to econometric characteristics, the resulting model is adequate and confirms the empirical findingsFindings & Value added: The results of the study showed that deeper diversification of the economy is required. To overcome oil dependence and conduct effective economic diversification, it is necessary to develop processing industries, expand the accessibility of small and medium enterprises to financial resources, and stimulate foreign investment in the non-oil sector.

Highlights

Oil and gas exporting countries tend to be highly dependent on their dominant sector
Research shows that the impact of natural resources on economic growth depends on how well a country is endowed with two types of capital that can be seen as complementary to natural resources: it is human capital and government management or institutional capital [1]
In government structures, the point of view was popular that efforts to diversify the economy were not so necessary, that the country should adhere to its specialization in the international division of labor as a supplier of natural resources

Summary

Introduction

Oil and gas exporting countries tend to be highly dependent on their dominant sector. This relationship has been a topic of discussion for many economists, scientists and researchers who put forward opposite theories. Natural resource wealth can provide opportunities for countries to build human and institutional capital. Supporters of economic dependence on energy resources to justify their point of view periods of high energy prices. In government structures, the point of view was popular that efforts to diversify the economy were not so necessary, that the country should adhere to its specialization in the international division of labor as a supplier of natural resources. Instability in the commodity markets cannot provide the economy with stable sustainable development, and this is a fact that contradicts the UN Sustainable Development Goals

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