Influence of industrial diversification on the economic sustainability of small mountain settlements in the north caucasus federal district

Introduction. Economic sustainability of small mountain settlements remains one of the key challenges of regional development due to limited economic diversification, demographic decline, and high dependence on a small number of industries. Although numerous studies have investigated regional resilience and sustainable territorial development, the relationship between industrial diversification and the stability of local economies in small mountain municipalities has received considerably less attention. This study aims to evaluate how differences in industrial structure influence the socio-economic sustainability of small mountain settlements in the North Caucasus Federal District. Methods. The study was based on official socio economic statistics collected for a group of small mountain municipalities over a five-year period. Industrial diversification was assessed using the Herfindahl–Hirschman Index, while an integrated sustainability indicator was calculated from normalized socio-economic variables, including employment, investment activity, income level, small business development, industrial output, and registered unemployment. Correlation and linear regression analyses were applied to quantify the relationship between industrial diversification and municipal sustainability. Results. The analysis demonstrated substantial differences in sustainability among municipalities with different levels of industrial diversification. Settlements characterized by a more diversified economic structure exhibited higher integrated sustainability indices, lower unemployment rates, stronger investment activity, and a larger number of small enterprises. The calculated Pearson correlation coefficient between industrial diversification and the integrated sustainability indicator reached 0.742 (p = 0.0003), indicating a strong positive relationship. The developed regression model explained approximately 55% of the observed variation in sustainability (R2 = 0.551), confirming that industrial diversification represents one of the principal factors affecting the long-term resilience of small mountain economies. Conclusions. The obtained results indicate that expanding the industrial structure through the development of complementary economic activities significantly enhances the resilience of small mountain settlements. The proposed methodological approach provides a practical tool for evaluating municipal sustainability and identifying priority areas for regional development policy. The findings may support governmental decision-making aimed at improving investment attractiveness, stimulating small business development, and strengthening the socio-economic resilience of mountain territories within the North Caucasus Federal District.

Human settlement · Regression analysis · Sustainability · Sustainable development · Economic and Technological Innovation · Land Use and Ecosystem Services · Regional resilience and development