Patterns of Technical Change and De-Industrialization

Abstract

Using a classical political economy approach we find aggregate regularities in the patterns of technical change followed by high income and developing countries (mostly from Latin America and Sub Saharan Africa) respectively. Such regularities allow us to propose an alternative definition of de-industrialization and study the issue of “premature de-industrialization” from a political economy perspective. In the (capital productivity, labor productivity) plane, a characteristic trajectory of high-income countries typically fluctuates in the quadrant where labor productivity growth rates are positive while capital productivity growth rates are negative (the industrialization quadrant). De-industrializing countries, on the other hand, have transitioned from the quadrant with positive labor productivity growth rates and negative capital productivity growth rates to the opposite quadrant (with negative labor productivity and positive capital productivity growth) and remained in this quadrant during the 1980s and 1990s. Both groups of countries, high income and de-industrializing seem to follow a cyclical pattern, revealing that the rate of industrialization is constantly fluctuating with varying labor and capital productivity growth rates.