The Economic Forces Behind Deindustrialization: An Empirical Investigation

The purpose of this paper is to provide an in-depth study of deindustrialization and to systematically analyze the reasons why the world’s most economically successful countries have experienced a sharp decline in relative manufacturing employment over the last decades. A large strand of empirical literature on deindustrialization aims at quantifying the relative importance of the economic forces behind deindustrialization, especially of the ‘internal’ and ‘external’ factors. While this study does not contradict the widespread belief that internal factors are quantitatively more important in explaining deindustrialization in advanced countries taken as a whole, our results, based on both static and dynamic techniques and panel data on 18 OECD countries from 1977 to 2007, however suggest that the role of globalization may be revised upwards when resorting to appropriate and well-defined indicators of trade in manufactures

The Drivers of Structural Change

The main goal of this paper is to provide an integrated survey of the literature devoted to identifying the drivers of structural change, broadly defined as the process of reallocation of economic activity across the three broad sectors agriculture, manufacturing and services. Using the GGDC 10-Sector Database, this paper first presents the empirical facts associated with structural change in different regions of the world – i.e. Europe and the USA, Asia, Latin America, and Africa – then reviews four determinants of structural change: (i) changes in income, (ii) changes in relative (sectoral) prices, (iii) changes in input-output linkages and (iv) changes in comparative advantage(s) via globalization and trade

Globalization and Deindustrialization in Advanced Countries

A strand of empirical research on deindustrialization seeks to quantify the relative importance of the economic forces behind deindustrialization, and especially of the internal and external factors, i.e. those linked to globalization and trade. The results of this literature are highly fragile, arguably because the commonly used indicators of trade are not well defined to capture the contribution of globalization to deindustrialization. While this empirical study does not necessarily contradict the widespread belief that the internal factors are quantitatively more important in accounting for deindustrialization in the OECD taken as a whole, our empirical results – based on panel data for 15 OECD advanced countries from 1970 to 2006 – nevertheless show that global exchanges have the potential to affect significantly and substantially a country’s sectoral patterns of employment. They also suggest that the contribution of globalization, and especially of growing North-South integration, to deindustrialization in advanced countries may be revised upwards when resorting to better-suited indicators of trade

Economic Development and Structural Change

This doctoral dissertation contributes to the understanding of structural change, often defined as the process of reallocation of economic activity and resources across the three broad sectors agriculture (primary sector), manufacturing (secondary sector) and services (tertiary sector). Increasingly connected to the study of modern growth, the analysis of structural change has known an important revival over recent decades, due in part to the economic concerns associated with the movement of deindustrialization that has particularly affected the world’s most economically successful countries since the last third of the 20th century. These concerns have indeed fed many discussions on the causes and consequences of structural change, as well as on the role of policy instruments in driving and accompanying the inter-sectoral reallocation of activity. The first part of the thesis gets particularly interested in the driving forces behind the process of structural change. It begins by placing structural change in a very long historical perspective, notably shedding light on the factors that contributed to the emergence of the Industrial Revolution, an event characterized by the acceleration of structural change and traditionally considered as a turning point in the history of mankind because it eventually brought about modernity. It then analyzes the main causes of structural change in market economies, putting a particular emphasis on two mechanisms of structural change that have been largely overlooked in the recent multi-sector growth literature: changes in input-output (sectoral) linkages and changes in comparative advantage via globalization and trade. With respect to trade, an empirical analysis reveals that global exchanges have the potential to influence significantly and substantially a country’s sectoral patterns of employment, and that the estimated contribution of trade, especially of trade with developing countries, to recent structural change (deindustrialization) in affluent countries may be revised upwards when resorting to better-suited indicators of trade in manufactures. The second part of this doctoral thesis deals more with the economic effects of structural change. In particular, it proposes a new shift-share method, which is an accounting method aimed at computing the impact of the economic structure - or structural change - on a territory’s economic performance. By way of illustration, it provides an application to manufacturing employment in the Belgian provinces between 1995 and 2007