Rethinking Deindustrialization

35 Pages Posted: 28 Mar 2016 Last revised: 5 Jun 2021

See all articles by Andrew B. Bernard

Andrew B. Bernard

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Valérie Smeets

Aarhus School of Business; Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Frederic Warzynski

Aarhus University - Department of Economics and Business Economics

Date Written: March 2016

Abstract

Manufacturing in high-income countries is on the decline and Denmark is no exception. Manufacturing employment and the number of firms have been shrinking as a share of the total and in absolute levels. This paper uses a rich linked employer-employee dataset to examine this decline from 1994 to 2007. We propose a different approach to analyze deindustrialization and generate a series of novel stylized facts about the evolution. While most of the decline can be attributed to firm exit and reduced employment at surviving manufacturers, we document that a non-negligible portion is due to firms switching industries, from manufacturing to services. We focus on this last group of firms before, during, and after their sector switch. Overall this is a group of small, highly productive, import intensive firms that grow rapidly in terms of value-added and sales after they switch. By 2007, employment at these former manufacturers equals 8.7 percent of manufacturing employment, accounting for half the decline in manufacturing employment. We focus on the composition of the workforce as firms make their transition. In addition, we identify two types of switchers: one group resembles traditional wholesalers and another group that retains and expands their R&D and technical capabilities. Our findings emphasize that the focus on employment at manufacturing firms overstates the loss in manufacturing-related capabilities that are actually retained in many firms that switch industries.

Suggested Citation

Bernard, Andrew B. and Smeets, Valérie and Warzynski, Frederic, Rethinking Deindustrialization (March 2016). NBER Working Paper No. w22114, Available at SSRN: https://ssrn.com/abstract=2755386

Andrew B. Bernard (Contact Author)

Dartmouth College - Tuck School of Business ( email )

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HOME PAGE: http://mba.tuck.dartmouth.edu/pages/faculty/Andrew.Bernard/

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

Valérie Smeets

Aarhus School of Business ( email )

Haslegaardsvej 10
DK-8210 Aarhus, 8210
Denmark

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

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Brussels, B-1050
Belgium

Frederic Warzynski

Aarhus University - Department of Economics and Business Economics ( email )

hermodsvej 22
DK-8230 Åbyhøj
Denmark
+45 89 48 61 95 (Phone)

HOME PAGE: http://www.hha.dk/~fwa/frederic.htm

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