Regional industrial diversification policies seek to achieve a more stable economy through a ‘better’ balance among the industries currently active in the region and through the development of new industries. In this paper, we provide a consistent model of regional industrial diversification that explicitly incorporates the regional industrial structure and sources of economic instability, and facilitates the inclusion of data on technologies not currently observable in the region. We illustrate it with an application to a current policy concern: the diversification of agriculture and food processing in Saskatchewan.
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