Is manufacturing special?
There is a lot of concern over the size, growth, and future of manufacturing, which constitutes one part of total economic output. Is this concern justified, because manufacturing has particular importance in driving growth, or is it misplaced?
- De Long, J. B. (2016) “Thinking about Deindustrialization.” Available at: Link.
- Fallows, J. (2007) “China Makes, the World Takes.” Available at: Link.
- Lawrence, R. Z. (2017) “Does manufacturing have the largest employment ‘multiplier’ for the domestic economy?” Available at: Link.
- Ritholtz, B. (2012) “How Much of US Consumables are Made in China?” Available at: Link.
- Smith, N. (2017) “Staying rich without manufacturing will be hard.” Available at: Link.
- The Economist (2012) “Manufacturing Concern.” Available at: Link.
- Imbs, J. and Wacziarg, R. (2003) “Stages of Diversification,” The American Economic Review. American Economic Association, 93(1), pp. pp. 63–86. Available at: Link.
This paper studies the evolution of sectoral concentration in relation to the level of per capita income. We show that various measures of sectoral concentration follow a U-shaped pattern across a wide variety of data sources: countries first diversify, in the sense that economic activity is spread more equally across sectors, but there exists, relatively late in the development process, a point at which they start specializing again. We discuss this finding in light of existing theories of trade and growth, which generally predict a monotonic relationship between income and diversification.
- Rodrik, D. (2016) “Premature deindustrialization,” Journal of Economic Growth, 21(1), pp. 1–33. doi: 10.1007/s10887-015-9122-3.
I document a significant deindustrialization trend in recent decades that goes considerably beyond the advanced, post-industrial economies. The hump-shaped relationship between industrialization (measured by employment or output shares) and incomes has shifted downwards and moved closer to the origin. This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers. Asian countries and manufactures exporters have been largely insulated from those trends, while Latin American countries have been especially hard hit. Advanced economies have lost considerable employment (especially of the low-skill type), but they have done surprisingly well in terms of manufacturing output shares at constant prices. While these trends are not very recent, the evidence suggests both globalization and labor-saving technological progress in manufacturing have been behind these developments. The paper briefly considers some of the economic and political implications of these trends. Copyright Springer Science+Business Media New York 2016
- Rodrik, D. (2013) “Unconditional Convergence in Manufacturing,” Quarterly Journal of Economics, 128(1), pp. 165–204.
Unlike economies as a whole, manufacturing industries exhibit unconditional convergence in labor productivity. The paper documents this finding for 4-digit manufacturing sectors for a large group of developed and developing countries over the period since 1990. The coefficient of unconditional convergence is estimated quite precisely and is large, at 3.0-5.6 percent per year depending on the estimation horizon. The result is robust to a large number of specification tests, and statistically highly significant. Because of data coverage, these findings should be as viewed as applying to the organized, formal parts of manufacturing.
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