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Staff Papers Logo    March 1999
Volume 46, Number 1
Growth, Trade, and Deindustrialization
By Robert Rowthorn and Ramana Ramaswamy

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Abstract: This paper shows that deindustrialization is explained primarily by developments that are internal to the advanced economies. These include the combined effects on manufacturing employment of a relatively faster growth of productivity in manufacturing, the associated relative price changes, and shifts in the structure of demand between manufactures and services. North-south trade explains less than one-fifth of deindustrialization in the advanced economies. Moreover, the contribution of north-south trade to deindustrialization has been mainly through its effects in stimulating labor productivity in northern manufacturing; it has had little enduring effect on the total volume of manufacturing output in the advanced economies. [JEL O1, O3, F1, F43]

1999 International Monetary Fund