Manufacturing exports: A virtuous circle of industrialization or a lock-in development pattern? The case of the machinery and textiles sectors

Abstract

This paper examines the relationship between the industrialization pattern and the structural change process. This approach fits in a global economic context characterized by Global Value Chains (GVCs), which shake up the pattern of industrialization. In fact, by entering a value chain, economies are able to industrialize and export high-technology goods without building a broad set of industrial capabilities. Using a panel of 117 countries over the period 1995–2017, our three-step analysis, first reveals that manufacturing exports may not automatically bring about economic upgrading - measured by the transformation of the export basket. Secondly, the inter-sectoral approach demonstrates that developing countries, for which industrialization no longer seems to be the main source of continuous development, are specialized in ‘textiles and textile articles’ for the poorest countries and in ‘machinery and mechanical appliances’ for middle-income countries. Finally, the intra-sectoral analysis shows that both of these sectors can become traps leading to either sectoral concentration or product concentration with low domestic value-added, both of which hinder the continuity of the transformation process in the productive structure. We introduce the idea of an ‘industrialization curse’ to illustrate our findings.