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Drivers of Deindustrialisation: Sub-system Analysis of Internationally Fragmented Production Structures

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  • Martin Labaj
  • Stracova Erika

Abstract

This paper deals with the drivers of deindustrialisation in major developed countries over the last two decades. In contrast to some recent studies, we show that the importance of manufacturing for the world economy has not declined during the examined period. We argue that the observed deindustrialisation measured by direct employment and value-added shares of manufacturing underestimates the importance of manufacturing. Many former in-house activities of manufacturing are nowadays outsourced to other industries and are not accounted for in the direct statistics. We show that at least in major developed countries the level of outsourcing reached its limits at the beginning of the new millennium. At the same time, the offshoring of activities interlinked with manufacturing became the dominant driver of deindustrialisation in these countries. We are the first to study the importance of manufacturing from a truly global perspective and we use final consumption expenditures approach that allows us to consistently analyse the role of i) outsourcing, ii) offshoring and iii) changes in final demand, in its development.

Suggested Citation

  • 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.
    • Handle: RePEc:brt:depwps:018
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    References listed on IDEAS

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    More about this item

    Keywords

    Input-output analysis; deindustrialisation; manufacturing; offshoring;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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