Industrialisation in Time and Space

This paper analyses broad changes in the global structure of production in the last half century. The analysis is carried out along two dimensions: sectoral and geographical. A novelty of the paper is the use of sector-specific PPPs to estimate the structure of production in current PPP international dollars. The analysis is based on a comprehensive dataset that covers 140 countries (accounting for 98% of global GDP in 2012) for the period 1960-2012. Salient findings of the paper include the following. First, in current prices there was a process of global de-industrialisation. The manufacturing share in global GDP dropped from more than 20% in the early 1960s to 12% by the end of the period. This process, however, was not even across country-groups and regions. As expected, it was much more pronounced in the advanced economies. In developing countries there was an increase in the share of manufacturing, followed by a decline from the early 1990s onwards. However, in constant prices, the share of manufacturing remained more or less constant. This implies that prices of services have been increasing much more rapidly than those of manufactured goods, probably due to slower productivity growth in services. In geographic terms, the share of developing countries in world manufacturing value added has increased from 25% to more than 50%. This phenomenon was clearly driven by the Asian developing economies. Finally, within manufacturing knowledge-intensive, high-tech industries and natural-resource intensive industries have increased their shares in global manufacturing value added.

JEL Classification: L16, L6, O11

Keywords: Global structure of production; regional shares; purchasing power parities; manufacturing; Baumol's law.