New patterns in deindustrialization
As economies across Europe and in the United States have become more knowledge-based, urban-centered, and tech-driven, people in manufacturing reliant regions have seen declining life expectancies, stagnating real incomes, and minimal job growth.
In recent years, social scientists have been grappling with the interconnected political, economic, and social effects of deindustrialization. But this literature is almost entirely confined to Europe and the U.S. In a new paper, DAVID KUNST broadens the scope of this research using a novel dataset on manufacturing employment by occupation in developing countries. He studies the labor market effects of 'premature deindustrialization,' finding a general decline in the hiring capacity of manufacturing sectors and a genuine risk from automation in emerging markets. The study comes to four conclusions:
"First, it is mostly unskilled jobs that have disappeared, and also the wage premium of workers with little formal education in manufacturing relative to other industries has declined. Second, the disappearing jobs have been among the most formal both relative to other industries, and to the manufacturing average. Third, premature deindustrialization has been driven by occupations which are intensive in tasks that are vulnerable to an increasing adoption of ICT. Fourth, the phenomenon pertains most clearly to middle income countries, as low income countries have been spared from premature job losses.
250 years after the beginning of the Industrial Revolution, it appears that manufacturing is losing its ability to employ unskilled workers more productively than other industries. Developing countries, abundant in unskilled labor, lose their comparative advantage in producing an increasing range of manufactured goods. Hence, future growth in developing countries may have to rely more on improvements in 'fundamentals' such as education and governance, and policy makers need to focus on a broader range of sectoral policies than in the past."
Link to the full paper.
- The notion of 'premature deindustrialization' was developed by Dani Rodrik in 2015. In that paper, Rodrik argued that "countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers" and suggested that "early deindustrialization could well remove the main channel through which rapid growth has taken place in the past." Link.
- In a 2017 report, Carol Graham, Sergio Pinto, and John Juneau II map the "geography of desperation" in the United States: "In general, minorities scored worse on all of the variables in states where there are proportionately fewer minorities, such as Washington State and Kansas. These include Maine, Wisconsin, North Dakota, and Florida. Poor whites, meanwhile, tended to score lower across the board in the Appalachian states, and then poorly in many of the Midwestern and Western heartland states." Link. Two more reports from Brookings offer suggestions for place-based policies in the U.S. to counter these effects. Link, link.
- David Clingingsmith and Jeffrey G. Williamson study the causes behind Indian deindustrialization from 1750-1860. Unlike literature which attributes the decline to growing competition in textile production from Britain, the authors find that the dissolution of Mughal hegemony and deteriorating climate conditions better account for the shift. Link.