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Premature Deindustrialization and Industry Polarization

Author

Listed:
  • Michael Sposi
  • Kei-Mu Yi
  • Jing Zhang

Abstract

We document two key patterns of structural change: premature deindustrialization and rising industry polarization. Using a dynamic open-economy model with sector-biased technological change (SBTC), we evaluate the role of trade in these shifts. Trade alone does not cause premature deindustrialization, but its interaction with SBTC—transmitting global technological change, amplifying the decline in manufacturing's relative price over time, and generating manufacturing trade imbalances across countries—deepens premature deindustrialization over time. Industry polarization, by contrast, emerges only through trade-driven specialization, as countries diverge along lines of comparative advantage.

Suggested Citation

  • Michael Sposi & Kei-Mu Yi & Jing Zhang, 2021. "Premature Deindustrialization and Industry Polarization," NBER Working Papers 29483, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29483
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    Cited by:

    1. Bonadio, Barthélémy & Huo, Zhen & Levchenko, Andrei A. & Pandalai-Nayar, Nitya, 2025. "Globalization, structural change and international comovement," Journal of Monetary Economics, Elsevier, vol. 151(C).
    2. Aristizabal-Ramirez, Maria & Leahy, John & Tesar, Linda L., 2023. "A north-south model of structural change and growth," Journal of Monetary Economics, Elsevier, vol. 133(C), pages 77-102.
    3. Hagen Kruse & Emmanuel Mensah & Kunal Sen & Gaaitzen Vries, 2023. "A Manufacturing (Re)Naissance? Industrialization in the Developing World," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(2), pages 439-473, June.
    4. Ippei Fujiwara & Kiminori Matsuyama, 2024. "A Technology-Gap Model of 'Premature' Deindustrialization," American Economic Review, American Economic Association, vol. 114(11), pages 3714-3745, November.
    5. Tasso Adamopoulos & Fernando Leibovici, 2024. "Trade Risk and Food Security," Working Papers 2024-004, Federal Reserve Bank of St. Louis, revised Feb 2024.
    6. Paul Gaggl & Aspen Gorry & Christian vom Lehn, 2023. "Structural Change in Production Networks and Economic Growth," CESifo Working Paper Series 10460, CESifo.
    7. Duc Nguyen, 2022. "Heterogeneous Paths of Structural Transformation," Working Papers tecipa-742, University of Toronto, Department of Economics.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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