Deindustrialisation and the Fear of Relocations in the Industry
The steady decline in the share of industry in total employment currently seems to be accelerated by competition from low wage countries, which depresses international prices for manufactured products and is being translated into offshore outsourcing and defensive innovation. In order to fully address these issues, we define offshore outsourcing in a broader sense, the one which is generally adopted in the public debate, namely trade in goods with countries where offshoring takes place. We replicate and extend the estimations realised by Rowthorn and Ramaswami (1998) and ask what has been the responsibility of outsourcing in the observed deindustrialisation in sixteen OECD countries. Our estimation strategy, relying on a dynamic panel methodology, leads to the conclusion that net trade with low wage countries is associated with a non-negligible average decrease of around 2 points in the manufacturing employment share between 1970 and 2002. However, this contribution, which substantially varies across countries, represents only a fifth of the deindustrialisation over the period. We did not find any increased impact of imports from developing countries in the second half of the period (1986-2002), other than that due to increased trade.
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