Working Paper: CEPR ID: DP10393
Authors: Dani Rodrik
Abstract: I document a significant deindustrialization trend in recent decades, that goes considerably beyond the advanced, post-industrial economies. The hump-shaped relationship between industrialization (measured by employment or output shares) and incomes has shifted downwards and moved closer to the origin. This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers. Asian countries and manufactures exporters have been largely insulated from those trends, while Latin American countries have been especially hard hit. Advanced economies have lost considerable employment (especially of the low-skill type), but they have done surprisingly well in terms of manufacturing output shares at constant prices. While these trends are not very recent, the evidence suggests both globalization and labor-saving technological progress in manufacturing have been behind these developments. Premature deindustrialization has potentially significant economic and political ramifications, including lower economic growth and democratic failure.
Keywords: deindustrialization; industrialization
JEL Codes: O14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| industrialization (employment and output shares) (O14) | income levels (J31) |
| globalization (F60) | manufacturing employment (L60) |
| globalization (F60) | manufacturing output (L60) |
| labor-saving technological progress (O49) | manufacturing employment (L60) |
| labor-saving technological progress (O49) | manufacturing output (L60) |
| trade liberalization (F13) | manufacturing employment (L60) |
| trade liberalization (F13) | manufacturing output (L60) |
| manufacturing sector strength (L60) | political stability (P26) |
| political stability (P26) | democratic processes (D72) |