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

Author

Listed:
  • Nayyar,Gaurav
  • Vargas Da Cruz,Marcio Jose
  • Zhu,Linghui

Abstract

The shares of manufacturing in value added and employment across a range of developing economies peaked at lower levels of per capita income compared with their high-income, early-industrializer precursors. Based on the statistical analysis of input-output tables and firm-level data, the paper contributes to the discussion on whether this"premature deindustrialization"matters by showing that: a) the premature declining share of the manufacturing sector is largely not driven by a statistical artifice whereby what was earlier subsumed in manufacturing value added is now accounted for as service sector contributions; b) Some features of manufacturing that were thought of as uniquely special for development, such as scale economies, exports, and innovation, are increasingly shared by services sector firms. Yet, a given service subsector is unlikely to provide opportunities for productivity growth and job creation for unskilled labor simultaneously; c) Some high-productivity services serve final demand or derive demand from several sectors, while others are more closely linked to a manufacturing base.

Suggested Citation

  • Nayyar,Gaurav & Vargas Da Cruz,Marcio Jose & Zhu,Linghui, 2018. "Does Premature Deindustrialization Matter ? The Role of Manufacturing versus Services in Development," Policy Research Working Paper Series 8596, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8596
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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. Taguchi, Hiroyuki, 2022. "Premature Deindustrialization Risk: The Case of Thailand," MPRA Paper 113560, University Library of Munich, Germany.
    4. 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.
    5. 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).
    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. 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.
    8. Çakır, Muhammet Sait & Aydemir, Resul, 2022. "A Dutch disease approach into the premature deindustrialization," Economic Systems, Elsevier, vol. 46(4).
    9. 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.
    10. Lar, Ni & Taguchi, Hiroyuki, 2023. "Premature deindustrialization or reindustrialization: The case of China’s latecomer provinces," MPRA Paper 118423, University Library of Munich, Germany.
    11. Taguchi, Hiroyuki, 2023. "Premature deindustrialization: an empirical analysis in latecomer developing countries," MPRA Paper 118346, University Library of Munich, Germany.
    12. 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.

    More about this item

    Keywords

    Textiles; Apparel&Leather Industry; Business Cycles and Stabilization Policies; General Manufacturing; Construction Industry; Common Carriers Industry; Food&Beverage Industry; Plastics&Rubber Industry; Pulp&Paper Industry; International Trade and Trade Rules; Transport Services; Public Sector Administrative and Civil Service Reform; Public Sector Administrative&Civil Service Reform; Economics and Finance of Public Institution Development; De Facto Governments; Democratic Government; Trade and Services;
    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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