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De- versus Re-industrialisation: Is Structural Change Reversible?

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  • Michael Peneder
  • Gerhard Streicher

Abstract

We investigate the causes of de-industrialisation and potential for re-industrialisation. Using WIOD data and introducing new measures of "induced value added chains", we directly relate a sector's income share to the net value added flows as induced by domestic and foreign final demand. This method identifies the declining share of manufacturing in domestic expenditures on final demand to be the main cause of de-industrialisation. International trade has a limited impact, though differences in comparative advantage between countries do matter. In addition, the strong decline of relative prices in manufacturing points to an interesting policy paradox: precisely if successful in raising competitiveness and hence productivity growth of manufacturing, they also further its global decline of relative prices. Contrary to the stated objective of re-industrialisation, meaningful industrial policies will accelerate de-industrialisation in the global economy. To raise the income share of manufacturing, policies must target, e.g., competition and productivity growth in services.

Suggested Citation

  • Michael Peneder & Gerhard Streicher, 2016. "De- versus Re-industrialisation: Is Structural Change Reversible?," WIFO Working Papers 506, WIFO.
    • Handle: RePEc:wfo:wpaper:y:2016:i:506
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    References listed on IDEAS

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    Cited by:

    1. Adrián Rial & Rafael Fernández, 2023. "Does tertiarisation slow down productivity growth? A Kaldorian–Baumolian analysis across 10 developed economies," Metroeconomica, Wiley Blackwell, vol. 74(1), pages 188-222, February.
    2. Harald Gruber, 2017. "Innovation, skills and investment: a digital industrial policy for Europe," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(3), pages 327-343, September.
    3. Meurers, Martin & Moenius, Johannes, 2018. "Optimal Public Investment in Economic Centers and the Periphery," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181579, Verein für Socialpolitik / German Economic Association.
    4. Murat A. Yülek, 2017. "On the Middle Income Trap, the Industrialization Process and Appropriate Industrial Policy," Journal of Industry, Competition and Trade, Springer, vol. 17(3), pages 325-348, September.
    5. Martin Labaj & Stracova Erika, 2019. "Drivers of Deindustrialisation: Sub-system Analysis of Internationally Fragmented Production Structures," Department of Economic Policy Working Paper Series 018, Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava.
    6. Gruber, Harald, 2017. "Innovation, Skills and Investment: A Digital Industrial Policy for Europe," 28th European Regional ITS Conference, Passau 2017 169464, International Telecommunications Society (ITS).

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