Industrial diversification in New Brunswick: Can we reach the efficient frontier

Regional fluctuations in income or employment has been a major topic of theoretical and empirical analysis. Industrial diversification can lead to a reduction in volatility in economic aggregates like employment and income. Since policymakers are increasingly concerned with developing strategies to reduce the volatility of regional economics and make them more stable, the goal of industrial diversification is worth pursuing.;The are a number of indices which measure the extent of diversification in a regional economy. Starting with the simple Ogive index, more sophisticated measures such as the Portfolio Variance were developed. Borrowing from the financial economics literature, this led to the portfolio selection model being applied to regional economic structures. The efficient frontier is the locus of best possible combinations of risk (volatility in income or employment) and return (regional income or employment growth). The regional economy is diversified if it lies on the efficient frontier. If it deviates from a point on the frontier, then the objective of the policymaker is to ensure that the economy moves to the frontier.;This report measures diversification for the economy of New Brunswick. It shows the regional diversification indices beginning with simple indices and finally an estimate of the efficient frontier.