Premature deindustrialization and inequality

Abstract

PurposeThe purpose of the paper is to determine why premature deindustrialization is occurring in many developing countries.Design/methodology/approachA theoretical structure for explaining premature deindustrialization is utilized. Then the comparative experiences of a number of developing countries are used to illustrate the operation of the theory.FindingsThe results indicate that increasing inequality among a number of developing countries has reduced the domestic market for labor intensive manufactured goods, resulting in stagnation in manufacturing. Also, the increasing inequality in developed countries has reduced international demand for labor intensive manufacturing. Thus developing countries have fewer opportunities to export labor intensive manufacturing.Research limitations/implicationsData on inequality is limited and it is very difficult to determine causality. However, intuition indicates that causality is most likely bi-directional.Practical implicationsStrategies of economic development must concern themselves with the effects that increasing inequality will likely have on the development of labor intensive manufacturing.Social implicationsSocial programs that bolster the purchasing power of poor families are likely to be important (social safety net). Broad-based agricultural growth will provide a basis for labor intensive manufacturing.Originality/valueThe originality stems from the linking of deindustrialization with rising inequality.