Premature deindustrialisation and growth slowdowns in middle-income countries

In this study, we examine how the premature deindustrialisation trend hinders the channels of economic growth in middle-income countries. To identify the ‘premature deindustrialisation’ phases, we arrive at a set of five conditions. The first and second conditions detect the deindustrialisation phase in terms of employment and value-added share of the manufacturing sector. In the last three conditions, we define the upper threshold levels in terms of income per capita, employment, and value-added share of the manufacturing sector to capture the ‘premature’ element in deindustrialisation. The empirical results indicate that premature deindustrialisation raises the likelihood of growth slowdowns in an economy. Further, the increase in informal and low-productive service employment raises the incidence of growth slowdowns in middle-income countries. The evidence emphasises that it is critical to reverse the early deindustrialisation trend to break out of the middle-income status.