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De-industrialization and comparative advantage in the global value chain

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  • Michael Peneder
  • Gerhard Streicher

Abstract

We investigate the causes of de-industrialization and potential for re-industrialization using trade-linked input–output data from WIOD. By introducing a new global value chain measure of comparative advantage, we relate a sector's share in domestic final demand to that in production and separate the direct effect of trade on its income share. This method identifies the declining share of manufacturing value added in domestic final expenditures to be the main cause of de-industrialization. Differences in comparative advantage between countries do matter, especially in the case of employment shares, but have a limited impact via the direct trade effect on value added. The findings point to a peculiar paradox of industrial policy: precisely when it is successful in raising competitiveness and hence productivity growth of manufacturing, it also furthers the global decline of relative prices in manufacturing. In contrast to the national objectives of re-industrialization, effective industrial policies accelerate de-industrialization in the global economy.

Suggested Citation

  • Michael Peneder & Gerhard Streicher, 2018. "De-industrialization and comparative advantage in the global value chain," Economic Systems Research, Taylor & Francis Journals, vol. 30(1), pages 85-104, January.
    • Handle: RePEc:taf:ecsysr:v:30:y:2018:i:1:p:85-104
    DOI: 10.1080/09535314.2017.1320274
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    References listed on IDEAS

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    1. Berger, Suzanne with the MIT Task Force on Production in the Innovation Economy, 2013. "Making in America: From Innovation to Market," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019914, December.
    2. Sposi, Michael, 2019. "Evolving comparative advantage, sectoral linkages, and structural change," Journal of Monetary Economics, Elsevier, vol. 103(C), pages 75-87.
    3. Philippe Aghion & Julian Boulanger & Elie Cohen, 2011. "Rethinking industrial policy," Policy Briefs 566, Bruegel.
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    Citations

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    Cited by:

    1. Marwil J. Dávila-Fernández, 2019. "Manufacture Content and Financialisation: An Empirical Assessment," Department of Economics University of Siena 811, Department of Economics, University of Siena.
    2. N.A. Nevskaya & A.P. Garnov & A.V. Brykin & E.V. Malakhova, 2018. "National Competitiveness as the Object of Indicative Planning in the Context of Re-industrialization," European Research Studies Journal, European Research Studies Journal, vol. 0(Special1), pages 148-155.
    3. Michael Peneder & Matthias Firgo & Gerhard Streicher, 2019. "Stand der Digitalisierung in Österreich," WIFO Studies, WIFO, number 61654, February.
    4. Michael Peneder & Nicole Schmidt & Anna Strauss & Stefan Weingärtner, 2018. "Österreichs Wettbewerbsfähigkeit im internationalen Vergleich," WIFO Working Papers 565, WIFO.
    5. Fritz, Oliver & Streicher, Gerhard, 2018. "Der Beitrag von Sachgüterexporten zur Wirtschaftsleistung: Eine Input-Output-Analyse," FIW Policy Brief series 039, FIW.
    6. Yu, Hui & Li, Huiru, 2023. "How does the global metal industry value network affect industrial structure upgrading ? The perspective of industry chain," Resources Policy, Elsevier, vol. 85(PB).
    7. S. V. Kuznetsov & A. E. Miller & L. M. Davidenko, 2019. "Development Prospects of Technological Integration: Regional Perspective," Studies on Russian Economic Development, Springer, vol. 30(1), pages 15-21, January.
    8. 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.
    9. Kebede, Selamawit G. & Heshmati, Almas, 2023. "Political Economy of Industrialization and Industrial Parks in Ethiopia," IZA Discussion Papers 15846, Institute of Labor Economics (IZA).
    10. Çakır, Muhammet Sait & Aydemir, Resul, 2022. "A Dutch disease approach into the premature deindustrialization," Economic Systems, Elsevier, vol. 46(4).
    11. Sanja Franc & Antea Barišić & Zoran Wittine, 2020. "The Dilemma over Washington Consensus Guidelines or Industrial Policy: Lessons from Croatia," Notitia - journal for economic, business and social issues, Notitia Ltd., vol. 1(6), pages 49-62, December.
    12. Marwil J. Dávila-Fernández & Lionello F. Punzo, 2018. "A Multi-Sectoral Approach to Financialisation," Department of Economics University of Siena 794, Department of Economics, University of Siena.

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