What are the main factors behind recent deindustrialisation ?

Abstract

This thesis investigates the determinants of recent deindustrialisation mainly in developed economies, focusing on differences between Low Technology and Medium to High Technology manufacturing sectors and between Eastern and Western Europe over the period 1996 to 2014. Using a decomposition model inspired by Tregenna (2009), the analysis separates the changes in employment share into sector share, labour intensity and productivity effects. Results show that in Low Technology sectors, most countries experienced a decline in employment driven by shrinking manufactoring sector shares and rising productivity, with Eastern Europe affected more severely. Medium to High Technology sectors display greater heterogeneity. Some countries, such as South Korea and Lithuania, recorded positive sector share effects, while Turkey saw gains from higher manufacturing labour intensity. Econometric estimates confirm the sector share effect as one of the most significant driver of employment deindustrialisation, productivity gains and higher relative productivity compared to services also have an impact. Outsourcing effects are found only for Low Technology sectors. Trade openness and GDP per capita do not show robust impact. Findings highlight a structural tension: policies that raise productivity may inadvertently accelerate manufacturing job losses, underscoring the need for balanced reindustrialisation strategies.