Deindustrialisation, structural change and sustainable economic growth
Fiona Tregenna
#2015-032
This paper reviews the literature and empirical evidence on
deindustrialisation, with a focus on premature deindustrialisation.
Structural change and industrialisation have long been considered
important for developing countries to 'catch up'. However, there has
been widespread deindustrialisation over the past few decades, which is
setting in at lower levels of income per capita and lower shares of
manufacturing in the employment or GDP than earlier. Premature
deindustrialisation can be defined as deindustrialisation that begins at
a lower level of GDP per capita and/or at a lower level of manufacturing
as a share of total employment and GDP, than is typically the case
internationally. Many of the cases of premature deindustrialisation are
in sub-Saharan Africa, in some instances taking the form of
'pre-industrialisation deindustrialisation'. It is argued here that
premature deindustrialisation is likely to have especially negative
effects on growth. In addition to being influenced by the level of
income per capita and share of manufacturing in the economy when
deindustrialisation begins, the effects of deindustrialisation on growth
are also expected to depend on whether or not it is policy induced and
the nature of the activities that are relatively contracting and
expanding. The paper concludes by exploring the implications for
policymakers facing deindustrialisation.
JEL Classification: L16, J21, O14, O25
Keywords: deindustrialisation, industrial development, structural
change, industrial policy, manufacturing