Global outsourcing and (de)industrialisation, 1995−2019 volume II: production, demand, and the dynamics of industrial change

Hubert Escaith

MPRA Paper from University Library of Munich, Germany

Abstract: This is the second volume of our data−driven analysis of the evolution of productive structure of economies between 1995 and 2019. It complements a first part delineating the main stylised facts characterising structural changes in the geographical distribution of World industrial production and the implications for employment. With a special emphasis on deindustrialisation, the present volume looks inside the production functions themselves. It investigates whether the decline of manufacturing shares in developed and some developing economies results from a statistical reclassification of activities due to domestic outsourcing, offshore relocation due to international outsourcing, or increasing demand constraints on the domestic and the export markets. Data on the use and origin of intermediate inputs provide information on the evolution of business models for each industry and their insertion in global value chains. It reveals the extent of domestic and international outsourcing and provides information on the evolution of business models across countries. While outsourcing motivated the investigation, the empirical analysis progressively relegates it to a secondary or ambiguous role. In its quest for deindustrialisation drivers, the study analyses the role of the demand constraints. The empirical results conclude by distinguishing normal and pathologic deindustrialisation in both developed and developing countries. Five broad lessons emerge from the analysis: (1) Heterogeneity of deindustrialisation, as the phenomenon is multidimensional; (2) Role of effective–demand constraints, as industrial expansion depends as much on absorption capacity as on supply potential, (3) Dual impact of outsourcing, when domestic or international outsourcing often signals functional specialisation and efficiency gains (a “Porterian” type of outsourcing), but may denote, at a contrary, a weakness (a “Post–Porterian” strategy); (4) Importance of global value chain (GVC) integration in developing successful business strategies; and (5) Importance of the domestic value chain, as successful GVC−based industrialisation requires also developing a strong domestic supply chain, particularly between high and medium technology industries.

Keywords: industrialisation; global manufacturing; employment; input−output analysis; tertiarization and servicification; regional integration (search for similar items in EconPapers)
JEL-codes: C67 F14 F16 J16 L60 O14 O47 (search for similar items in EconPapers)
Date: 2026-03-16
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