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Does Premature Deindustrialization Matter? The Role of Manufacturing versus Services in Development

Author

Listed:
  • Nayyar Gaurav
  • Cruz Marcio

    (World Bank, Washington, DC, USA)

  • Zhu Linghui

    (World Bank, Beijing, China)

Abstract

“Premature deindustrialization” typically reflects the fact that the services sector has grown faster than manufacturing at lower levels of per capita income compared to the past. This paper, based on cross-country data, shows that the rising share of services is largely not driven by a statistical artifact whereby what was earlier subsumed in manufacturing value added is now accounted for as service sector contributions. Yet, this matters less for development opportunities because features of manufacturing that were thought of as uniquely special for productivity growth are also shared by some services. And the growth of these high-productivity services is not closely linked to a manufacturing base as it draws on both intermediate demand from other sectors as well as final demand from home and abroad. The prospect of services-led development in lower-income countries however, is limited by the fact that a given service subsector is unlikely to provide opportunities for productivity growth and job creation for unskilled labor simultaneously.

Suggested Citation

  • Nayyar Gaurav & Cruz Marcio & Zhu Linghui, 2021. "Does Premature Deindustrialization Matter? The Role of Manufacturing versus Services in Development," Journal of Globalization and Development, De Gruyter, vol. 12(1), pages 63-102, June.
    • Handle: RePEc:bpj:globdv:v:12:y:2021:i:1:p:63-102:n:5
    DOI: 10.1515/jgd-2020-0006
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    Cited by:

    1. Lengyel, Imre & Nagy, Benedek & Udvari, Beáta, 2019. "Újraiparosodás Kelet-Közép-Európában - újraéledő centrum-periféria munkamegosztás? [Reindustrialization in Central and Eastern Europe: reviving the core and periphery division of labour?]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 163-184.
    2. Çakır, Muhammet Sait & Aydemir, Resul, 2022. "A Dutch disease approach into the premature deindustrialization," Economic Systems, Elsevier, vol. 46(4).
    3. Kym Anderson & Sundar Ponnusamy, 2019. "Structural Transformation to Manufacturing and Services: What Role for Trade?," Asian Development Review, MIT Press, vol. 36(2), pages 32-71, September.
    4. Abdur Rahman,Amanina Binti & Schmillen,Achim Daniel, 2020. "From Farms to Factories and Firms : Structural Transformation and Labor Productivity Growth in Malaysia," Policy Research Working Paper Series 9463, The World Bank.
    5. R, Rekha & M, Suresh Babu, 2022. "Premature deindustrialisation and growth slowdowns in middle-income countries," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 377-389.
    6. Djidonou, Gbenoukpo Robert & Foster-McGregor, Neil, 2022. "Stagnant manufacturing growth in India: The role of the informal economy," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 528-543.
    7. Lar, Ni & Taguchi, Hiroyuki, 2023. "Premature deindustrialization or reindustrialization: The case of China’s latecomer provinces," MPRA Paper 118423, University Library of Munich, Germany.
    8. Taguchi, Hiroyuki, 2022. "Premature Deindustrialization Risk: The Case of Thailand," MPRA Paper 113560, University Library of Munich, Germany.
    9. Taguchi, Hiroyuki, 2023. "Premature deindustrialization: an empirical analysis in latecomer developing countries," MPRA Paper 118346, University Library of Munich, Germany.
    10. Avdiu,Besart & Bagavathinathan,Karan Singh & Chaurey,Ritam & Nayyar,Gaurav, 2022. "India's Services Sector Growth : The Impact of Services Trade on Non-tradable Services," Policy Research Working Paper Series 10094, The World Bank.
    11. Taguchi, Hiroyuki, 2022. "Risk of premature deindustrialization: the case of the latecomer’s developing countries in Asia," MPRA Paper 113551, University Library of Munich, Germany.
    12. Auktor, Georgeta Vidican, 2022. "The opportunities and challenges of Industry 4.0 for industrial development: A case study of Morocco's automotive and garment sectors," IDOS Discussion Papers 2/2022, German Institute of Development and Sustainability (IDOS).

    More about this item

    Keywords

    premature deindustrialization; developing economies; manufacturing; services sector; O14; O10;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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