Deindustrialization and Industry Polarization

Michael Sposi, Kei-Mu Yi and Jing Zhang

No 428, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: We add to recent evidence on deindustrialization and document a new pattern: increasing industry polarization over time. We assess whether these new features of structural change can be explained by a dynamic open economy model with two primary driving forces, sector-biased productivity growth and sectoral trade integration. We calibrate the model to the same countries used to document our patterns. We find that sector-biased productivity growth is important for deindustrialization by reducing the relative price of manufacturing to services, and sectoral trade integration is important for industry polarization through increased specialization. The interaction of these two driving forces is also essential as increased trade openness transmits global technological change to each country's relative prices, sectoral specialization and sectoral trade imbalances.

Keywords: structural change; international trade; Sector Biased Productivity Growth (search for similar items in EconPapers)
JEL-codes: F11 F43 O11 O41 (search for similar items in EconPapers)
Pages: 65
Date: 2024-08-05
New Economics Papers: this item is included in nep-dge, nep-gro, nep-int and nep-opm
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Related works:
Working Paper: Deindustrialization and Industry Polarization (2021)
Working Paper: Deindustrialization and Industry Polarization (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:98630

DOI: 10.24149/gwp428

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