Premature deindustrialization and environmental degradation

Abstract

It is well recognized that countries' economic growth processes structurally shift from the agricultural sector to the industrial sector and, accordingly, the service sector. Premature deindustrialization, on the other hand, refers to the situation in which the transition from the industrial sector to the service sector occurs earlier than the transformation of the developing countries in the structural transformation process that these countries underwent in the 20th and 21st centuries. Although the shift from the industrial to the service sectors is typically seen as a positive thing for the environment, it is still unclear how the transformation that took place prior to the industrialization process's maturity period, or the loss of technological advancements obtained from the industrial sector, will affect the environment. Based on this, the purpose of this study is to explore the environmental impacts of deindustrialization in both industrialized developed countries and developing countries which are accepted as risky countries in terms of premature deindustrialization. In order to do this, the recently developed panel non-linear ARDL approach is used, and the potential asymmetry between the industrialization process and environmental deterioration is thus investigated. The results show that both country groups experience increased environmental deterioration due to the industrialization process (positive shocks of industrialization). Conversely, deindustrialization (negative shocks of industrialization) slows down the environmental deterioration in developed nations while speeding it up over time in developing countries. Therefore, the results show that premature deindustrialization has long-term negative effects on environmental quality.