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Patterns of Deindustrialization: Are Countries Converging?

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  • Fabrizio Ferretti
  • Michele Mariani
  • Elena Sarti

Abstract

During the last decades, the share of manufacturing in aggregate output (and employment) has declined in almost all advanced and emerging economies. In this paper, we investigated the patterns of deindustrialization in a sample of 117 (low-, middle-, and high-income) countries from 1995 to 2018. To this aim, we applied the nonlinear time-varying factor model, initially proposed by Phillips and Sul, to identify potential clubs wherein groups of countries converge toward a similar manufacturing share of GDP. Furthermore, we estimated an ordered logit model to assess the impact of economic globalization and technological revolution on the probability of falling into a particular club. Our results did not provide any support for the hypothesis of global convergence. However, the clustering algorithm successfully identified four strong final clubs, where the share of manufacturing on GDP ranges, on average, from 6% to 18%. Finally, the logit model indicated that as the R&D expenditures and the technological content of manufactured goods increased, so did the likelihood of belonging to a club with a high share of manufacturing value-added on GDP.

Suggested Citation

  • Fabrizio Ferretti & Michele Mariani & Elena Sarti, 2022. "Patterns of Deindustrialization: Are Countries Converging?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(10), pages 1-78, October.
    • Handle: RePEc:ibn:ijefaa:v:14:y:2022:i:10:p:78
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    References listed on IDEAS

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    1. Peter C. B. Phillips & Donggyu Sul, 2009. "Economic transition and growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1153-1185.
    2. Pasinetti,Luigi L., 1983. "Structural Change and Economic Growth," Cambridge Books, Cambridge University Press, number 9780521274104.
    3. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    4. Peter C. B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Econometrica, Econometric Society, vol. 75(6), pages 1771-1855, November.
    5. Dani Rodrik, 2016. "Premature deindustrialization," Journal of Economic Growth, Springer, vol. 21(1), pages 1-33, March.
    6. Felipe, Jesus & Mehta, Aashish, 2016. "Deindustrialization? A global perspective," Economics Letters, Elsevier, vol. 149(C), pages 148-151.
    7. Dosi, Giovanni & Riccio, Federico & Virgillito, Maria Enrica, 2021. "Varieties of deindustrialization and patterns of diversification: why microchips are not potato chips," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 182-202.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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