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.
I am grateful to Elias Sanchez-Eppler and Russell Morton for expert research assistance, Robert Lawrence and Arvind Subramanian for useful conversations, and Jesus Felipe for sharing his data set. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Dani Rodrik, 2016. "Premature deindustrialization," Journal of Economic Growth, vol 21(1), pages 1-33. citation courtesy of