Deindustrialization: Causes and ImplicationsThree broad developments have caused concern in the advanced economies in recent years: (i) the shrinking share of manufacturing employment; (ii) the stagnation of average real wages and the rise in inequality of earnings since 1973 in the United States; and (iii) the massive rise in unemployment since the early 1970s in much of Europe.2 These developments have coincided with what is commonly perceived to have been a period of unusually rapid growth in trade and capital movements-particularly between the advanced and developing countries. The coexistence of these phenomena has tended to foster the perception of a causal link from globalization to the labor market problems confronting the advanced economies. The main focus of this paper is on the causes of the long-term decline in the share of manufacturing employment in the advanced economies-a phenomenon referred to as deindustrialization. It is, however, useful in this context to review briefly the debate on the inter-relationships among globalization, earnings inequality and unemployment, before moving on to the issue of deindustrialization. |
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21 Industrial Countries accounting for deindustrialization advanced economies Appendix Baumol Blackman and Wolff capita income constant price Cross-Section Estimates cross-section regressions Dependent Variable developing countries differences economic development Employment Data Sample employment in manufacturing employment share Engel's Law equation European Union factors fall group of industrial growth of productivity highly significant implies Industrial Share investment Japan labor productivity LGDP LGDPSQ living standards Manufacturing in Employment Manufacturing Share manufacturing to services manufacturing trade balance manufacturing value added North-South trade OECD Historical Statistics Overall trade balance process of deindustrialization productivity growth productivity in manufacturing Province of China real output regression analysis rising Rowthorn service sector share of employment share of industrial share of manufacturing share of services structure of employment Table A5 Taiwan Province technologically progressive technologically stagnant total civilian employment total employment total exports trade balance coefficient trade specialization trend U.S. dollars United Wald test Wood hypothesis World Economic Outlook