Import concentration

The degree of geographical concentration of international trade by product is determined by the Herfindahl index. The market is not concentrated if the index lies below 0.15, somewhat concentrated with an index from 0.15 to 0.25 and concentrated when the index is 0.25 or higher.

The index with a value between 0 and 1 shows the degree of geographical concentration of the international goods trade. It is also known as the Herfindahl-Hirschman Index (HHI). The index is calculated by squaring the shares of the individual countries in total Dutch imports of a specific product and then summing them. The stronger the link of specific product trade is with only a limited number of countries and therefore the stronger the geographical concentration, the higher the index. Some examples: if there is 1 country that is responsible for all Dutch imports of a product, the index equals 1. If there are 2 countries that each supply an equal amount, the index equals 1/2*1/2 + 1/2*1/2 = 1/2. If there are 3 countries which each supply the same amount, the index equals 1/3*1/3 + 1/3*1/3 + 1/3*1/3 = 1/3.

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