Premature Deindustrialization and Industry Polarization

Michael Sposi, Kei-Mu Yi and Jing Zhang

No 29483, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document two key patterns of structural change: premature deindustrialization and rising industry polarization. Using a dynamic open-economy model with sector-biased technological change (SBTC), we evaluate the role of trade in these shifts. Trade alone does not cause premature deindustrialization, but its interaction with SBTC—transmitting global technological change, amplifying the decline in manufacturing's relative price over time, and generating manufacturing trade imbalances across countries—deepens premature deindustrialization over time. Industry polarization, by contrast, emerges only through trade-driven specialization, as countries diverge along lines of comparative advantage.

JEL-codes: F11 F43 O11 O41 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-cwa, nep-gro, nep-pol and nep-tid
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