Abstract

There has been considerable debate over the causes and consequences of ‘deindustrialisation’. The relative decline of manufacturing, and particularly of manufacturing employment, and the corresponding relative growth of services, is prevalent in both slow and fast growing economies. This has led many to argue that the process is one of historical evolution such that the advanced stage of economic development is characterised by a modern tertiary sector with growing preferences for service products. This paper argues that this view is an oversimplification: dein‐dustrialisation may result from economic success; however, it may also reflect economic weaknesses. In particular, a declining manufacturer sector may have adverse impacts on a trading nation's ability to generate sufficient exports to pay for necessary imports, and hence also on the growth of productivity, national income and living standards.

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