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The deindustrialisation/tertiarisation hypothesis reconsidered: a subsystem application to the OECD7

  • Sandro Montresor
  • Giuseppe Vittucci Marzetti

The diffusion of outsourcing and vertical foreign direct investment (FDI) among manufacturing firms, along with the vertical integration of market services into manufacturing, is questioning the so called 'Deindustrialisation/Tertiarisation' (DT) hypothesis. In particular, it has been argued that DT might be an 'apparent' phenomenon, in fact amounting to a simple reorganisation of production across national and sectoral boundaries. The empirical studies that try to support this hypothesis, however, cannot be deemed conclusive as they suffer two methodological drawbacks: a non-(sub-)systemic sectoral level of analysis and a not truly global empirical approach. In order to overcome these drawbacks, the paper carries out an investigation of the actual extent to which DT occurred in the OECD area over the 1980s and the 1990s with two modifications: a sector instead of a subsystem perspective, retaining both direct and indirect relations and a 'pseudo-world' of seven OECD countries, thus taking into account the 'global' dimension of the phenomenon. Our results strongly support the DT hypothesis: although the weight of market services in the manufacturing subsystem increases, providing a counterbalance to manufacturing decline, subsystem shares significantly decrease, thus confirming DT as a more fundamental trend of the investigated period. Copyright The Author 2010. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 35 (2011)
Issue (Month): 2 ()
Pages: 401-421

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Handle: RePEc:oup:cambje:v:35:y:2011:i:2:p:401-421
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  1. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
  2. Montresor Sandro & Vittucci Marzetti Giuseppe, 2007. "Outsourcing and Structural Change: What Can Input-Output Analysis Say About It?," Economia politica, Società editrice il Mulino, issue 1, pages 43-78.
  3. Wolff, Edward N., 1984. "Industrial Composition, Interindustry Effects, and the US Productivity Slowdown," Working Papers 84-09, C.V. Starr Center for Applied Economics, New York University.
  4. Victor R. Fuchs, 1964. "Productivity Trends in the Goods and Service Sectors, 1929-61: A Preliminary Survey," NBER Books, National Bureau of Economic Research, Inc, number fuch64-1, November.
  5. G. Vittucci Marzetti, 2008. "Input-output data and service outsourcing. A reply to Dietrich, McCarthy and Anagnostou," Working Papers 621, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. Ramana Ramaswamy & Bob Rowthorn, 1997. "Deindustrialization; Causes and Implications," IMF Working Papers 97/42, International Monetary Fund.
  7. W. W. Rostow, 1959. "The Stages Of Economic Growth," Economic History Review, Economic History Society, vol. 12(1), pages 1-16, 08.
  8. Victor R. Fuchs, 1965. "The Growing Importance of the Service Industries," The Journal of Business, University of Chicago Press, vol. 38, pages 344.
  9. Schettkat, Ronald & Yocarini, Lara, 2006. "The shift to services employment: A review of the literature," Structural Change and Economic Dynamics, Elsevier, vol. 17(2), pages 127-147, June.
  10. Oscar De Juan & Eladio Febrero, 2000. "Measuring Productivity from Vertically Integrated Sectors," Economic Systems Research, Taylor & Francis Journals, vol. 12(1), pages 65-82.
  11. Postner, Harry H, 1990. "The Contracting-Out Problem in Service Sector Analysis: Choice of Statistical Unit," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(2), pages 177-86, June.
  12. Michael Dietrich, 1999. "Explaining Economic Restructuring: An input-output analysis of organisational change in the European Union," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(2), pages 219-240.
  13. Roberto Scazzieri, 1990. "Vertical Integration in Economic Theory," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 13(1), pages 20-46, October.
  14. McCarthy, Ian & Anagnostou, Angela, 2004. "The impact of outsourcing on the transaction costs and boundaries of manufacturing," International Journal of Production Economics, Elsevier, vol. 88(1), pages 61-71, March.
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