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The Factory-Free Economy: Outsourcing, Servitization and the Future of Industry

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  • Lionel Fontagné

    () (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • Ann Harrison

    ()

Abstract

The shift towards a "factory-free" economy has drawn the attention of policy makers in North America and Europe. Some politicians have articulated alarming views, initiating mercantilist or ‘beggar-thy-neighbour' cost-competitiveness policies. Yet companies that concentrate research and design innovations at home but no longer have any factories there may be the norm in the future. This paper summarizes the key themes emerging from a conference on de-industrialization. De-industrialization is a process that happens over time in all countries, even China. The distinction between manufacturing and services is likely to become increasingly blurry. More manufacturing firms are engaging in services activities, and more wholesale firms are engaging in manufacturing. One optimistic perspective suggests that industrial country firms may be able to exploit the high-value added and skill-intensive activities associated with design and innovation, as well as distribution, which are all components of the global value chain for manufacturing. Although this ongoing transformation of the industrial economies may be consistent with evolving comparative advantage, it has significant short-run costs and requires far-sighted investments. These include the costs to workers who are caught in the shift from an industrial to a service economy, and the need to invest in new infrastructure and education to prepare coming generations for their changing roles.

Suggested Citation

  • Lionel Fontagné & Ann Harrison, 2017. "The Factory-Free Economy: Outsourcing, Servitization and the Future of Industry," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01430326, HAL.
  • Handle: RePEc:hal:cesptp:hal-01430326
    DOI: 10.3386/w23016
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01430326
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    References listed on IDEAS

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    Cited by:

    1. Fiorini, Matteo & Hoekman, Bernard & Malgouyres, Clément, 2016. "Services Policy Reform and Manufacturing Employment: Evidence from Transition Economies," CEPR Discussion Papers 11694, C.E.P.R. Discussion Papers.
    2. Lionel Fontagné & Ann Harrison, 2017. "The Factory-Free Economy: Outsourcing, Servitization and the Future of Industry," NBER Working Papers 23016, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Services; De-industrialization; Trade; Offshoring; Labour market;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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