Liu Yang, Bin Ni, 21 May 2019

Concerns have been raised that outward foreign direct investment may reduce domestic employment and lead to the ‘hollowing-out’ of the manufacturing industries at home. This column uses a unique dataset of Japanese firms’ overseas activities to show that going abroad does not necessarily lead to a reduction of domestic employment. Investment by Japanese firms into other Asian countries has a positive impact on domestic job creation and a negative impact on job destruction, whereas the impact of investment into European and North American countries is negative for both job creation and destruction in Japan.

Philipp Ager, Benedikt Herz, 16 May 2019

The transition from high to low fertility rates is regarded as one of the most important determinants of sustainable long-run growth. But despite its importance, there is still an ongoing debate about its causes and timing. This column demonstrates that a sustained shift from agriculture to manufacturing contributed to the fertility decline in the American South at the turn of the 20th century. 

Simone Moriconi, Giovanni Peri, Dario Pozzoli, 24 February 2019

Firms’ offshoring decisions depend on the size of entry costs in target countries. But the institutional and policy determinants of these costs have received little empirical attention. This column uses data on 2,000 Danish manufacturing firms to explore how costs of entry affect offshoring decisions. Higher levels of labour market rigidity, credit risk, and corruption all lower the probability of offshoring to a given country, while immigrant networks within the firm increase the likelihood of offshoring to their home countries. 

Bernhard Michel, Caroline Hambÿe, Bart Hertveldt, 21 January 2019

Domestic value creation is shaped by how and to what extent economies integrate into global value chains. This column argues that further insights can be gained by distinguishing export-oriented and domestic market firms in standard indicators of global value chain integration and participation. Using data for Belgium, it documents that export-oriented firms differ from domestic market firms in terms of input structure and import patterns. These two types of firms play different roles in determining the nature of a country’s global value chain participation.

Eric Gould, 19 December 2018

Declining manufacturing jobs in the US has a disproportionate impact on less-educated workers. Given that the black population is less educated than the white population, this will have a larger effect on blacks relative to whites. This column uses US Census data to show that the decline has increased inequality both within black and white communities and between black and white communities. It has also widened racial gaps in income, employment, health, marriage, and family formation.

Hâle Utar, 06 December 2018

The impact of trade shocks on labour market shifts is usually studied in the context of re-training and social welfare frictions. Using evidence from Denmark, this column shows how workers can experience long-run reductions in earnings no matter how easy it is to change sector. A sudden and obligatory shift toward a new sector may, by its nature, generate some worker dissatisfaction.

Oya Celasun, Bertrand Gruss, 25 May 2018

The manufacturing sector is believed to play a unique role as a catalyst for productivity growth and income convergence, and as a provider of well-paid jobs for less-skilled workers. This column argues, however, that the declining share of manufacturing employment over the past decades need not hurt the income convergence prospects of developing economies and that the loss of manufacturing jobs can only explain a small fraction of the rise in inequality in advanced economies. That said, getting the policies right is key to help countries make the most out of structural transformation. 

Koen De Backer, Sébastien Miroudot, Davide Rigo, 19 April 2018

Multinational enterprises that produce goods rely on services to organise their value chain, so barriers to investment in services are likely to affect their production. The column uses a new and comprehensive OECD database to measure the share of services in the exports of multinational enterprises, and also in the output of their foreign affiliates. The results suggest that policymakers may need to focus more on the services that support manufacturing industries.

Joshua Aizenman, Yothin Jinjarak, Nam Ngo, Ilan Noy, 11 December 2017

The Global Crisis and its aftermath has focused attention on increasing inequality, and specifically on declining real incomes of the working poor. Comparing the US to Germany, this column argues that pushing more students to degree-granting colleges may no longer be the most efficient way to deal with the challenges caused by the decline in manufacturing employment affecting, in particular, lower-income households. Well-resourced, well-targeted vocational training can prove to be a better long-term investment in skill acquisition to help ameliorate the difficulties faced by workers whose prospects look to be quite bleak.

Russell Cooper, Moritz Meyer, Immo Schott, 28 October 2017

A major factor behind the ‘German miracle’ – which saw GDP collapse by almost 7% during the Global Crisis but unemployment increase by less than 1% – was a ‘short-time work’ policy that incentivised firms to reduce workers' hours rather than laying off workers. This column explores the effectiveness of the policy and the potentially negative effects on output and productivity. In the short term, short-time work prevented steeper falls in output and employment. However, it also affected the reallocation of labour between more and less productive firms, leading to medium-term productivity losses.

Wolfgang Dauth, Sebastian Findeisen, Jens Südekum, Nicole Woessner, 19 September 2017

Recent research has shown that industrial robots have caused severe job and earnings losses in the US. This column explores the impact of robots on the labour market in Germany, which has many more robots than the US and a much larger manufacturing employment share. Robots have had no aggregate effect on German employment, and robot exposure is found to actually increase the chances of workers staying with their original employer. This effect seems to be largely down to efforts of work councils and labour unions, but is also the result of fewer young workers entering manufacturing careers.

Nicholas Bloom, Erik Brynjolfsson, Lucia Foster, Ron Jarmin, Megha Patnaik, Itay Saporta Eksten, John Van Reenen, 17 May 2017

Disentangling the relationship between management practices and productivity has been hampered by the absence of large sample data across plants and firms. This column exploits a new survey covering US manufacturing to show that management practices vary both among and within companies. Furthermore, management practices are just as important for productivity as a number of other factors associated with successful businesses, such as technology adoption. 

Adrian Wood, 18 March 2017

In defending trade from misguided protectionism, economists argue that the main killer of manufacturing employment around the world has been technology, not trade. This column explores how globalisation has caused the sectoral structures of countries to conform more closely to their factor endowments. In the skill-abundant developed regions, manufacturing became more skill-intensive, while in skill-scarce and land-scarce Asia, labour-intensive manufacturing expanded. In land-abundant developing Africa, Latin America, and the Middle East, by contrast, manufacturing contracted.

Wolfgang Dauth, Sebastian Findeisen, Jens Südekum, 26 January 2017

The decline of manufacturing jobs in the US has been the focus of much attention recently, with rising trade with China cited as one explanation. This column describes how the German economy has experienced a similar secular decline in manufacturing and rising service employment, but that growing trade with China and Eastern Europe did not speed up this trend. In fact, rising exports to the new markets have stabilised industry jobs.

Italo Colantone, Piero Stanig, 23 November 2016

The vote for Brexit was a watershed moment in European politics. This column investigates the causal drivers of differences in support for the Leave campaign across UK regions. Globalisation in the form of the ‘Chinese import shock’ is found to be a key driver of regional support for Brexit. The results suggest that policies are needed that help to redistribute the benefits of globalisation across society. 

Yi Huang, Marco Pagano, Ugo Panizza, 03 November 2016

High levels of public debt are correlated with lower economic growth across countries, but questions remain about whether this relationship is causal. Using Chinese data, this column explores whether increasing public debt crowds out private investment. City-level investment ratios are found to be negatively correlated with local government debt for private manufacturing firms, but not for state-owned or foreign-owned manufacturers. This suggests that as well as the short-term benefits of fiscal stimulus, there might also be negative longer-term effects, such as the crowding out of more efficient firms. 

Nobuya Fukugawa, Akira Goto, 08 July 2016

Local public technology centres (Kosetsushi) in Japan have demonstrated notable success in fostering the development of regional industries. This column reports the results of the first branch-level survey of Kosetsushi, focusing on three areas: manufacturing, foods, and design. Kosetsushi are found to help clients through diverse, tailored technical consultations and, increasingly, by acting as a network hub for the transfer of symbolic and analytical knowledge. These findings have particular relevance for regional governments attempting to foster innovation through similar institutions.

Masayuki Morikawa, 23 June 2016

The shifting balance between manufacturing and service industries in developed economies has significant implications for long-term growth and international trade. This column uses Japanese firm-level data to analyse the impact of ‘factoryless goods producers’ on overall productivity. As these producers specialise in tasks in which advanced economies have a comparative advantage, it is anticipated that when combined with falling production costs and trade liberalisation, they will contribute to economic growth.

Andrew Bernard, Valerie Smeets, Frederic Warzynski, 22 June 2016

Deindustrialisation is a major policy concern in high-income countries not only because of resulting unemployment, but also because of the long-run implications for growth. This column uses evidence from Denmark to analyse whether it is being measured in the right way. A substantial fraction of the decline in manufacturing actually reflects the changing nature of production. Service sector firms that still perform many of the value-adding activities of traditional manufacturing firms should not be overlooked by policymakers.

Brian Varian, 29 May 2016

Modern discussions about a country’s ‘decline in manufacturing’ are seldom meaningful. Such talk of industrialisation and deindustrialisation across the entire sector tends to ignore important variation across individual industries. This column draws lessons from the revealed comparative advantage of late-Victorian Britain – the ‘workshop of the world’. Advantage lay mainly in industries that were relatively capital-intensive and that didn’t rely on large pools of unskilled labour. Despite its resource wealth, even Britain in the first era of globalisation was at a measurable comparative disadvantage in a number of industries.



CEPR Policy Research