David Martínez Turégano, Robert Marschinski, 11 August 2020

The EU’s falling share in global manufacturing has fuelled concerns about an overall loss of competitiveness. However, sectoral idiosyncrasies are strong and advise against a ‘one-size-fits-all’ policy intervention. This column uses the World Input-Output Tables to decompose the value added for manufacturing value chains and study the drivers of EU’s relative decline. Competitiveness concerns are most warranted for electronics, a key sector for productivity and innovation. The EU’s global share in electronics has fallen even more than in total manufacturing, without evidence that specialisation in other segments of this value chain could significantly mitigate the trend.

Ayça Tekin-Koru, 14 May 2020

The strict and prolonged age-specific containment measures in Turkey have both reduced infection/death rates and enabled less strict restrictions for the lower-risk groups. This column reviews Turkey’s response and examines the real-time effects of the COVID-19 crisis on production in Turkey. If finds that the targeted containment measures appear to have helped reduce a contraction in production that could have been much worse with a uniform lockdown. It also finds that the major brunt of the health crisis in terms of its human costs has been borne by the working class.

Torfinn Harding, Radek Stefanski, Gerhard Toews, 29 April 2020

Due to the collapse in the price of oil, oil-exporting economies are experiencing a huge loss of foreign revenues. This column argues that this may create a window of opportunity to transition away from resource dependence by expanding the tradable goods sector, hence diversifying the economies. Assuming symmetric economic responses for booms and busts and relying on estimates for unexpected giant resource discoveries which predict an appreciation of the real exchange rate and a contraction of the manufacturing sector, the current drop in the oil price may lead to a boom in manufacturing.

Andrea Ariu, Florian Mayneris, Mathieu Parenti, 06 February 2020

Many large and successful firms sell both goods and services; yet economists and policymakers continue to consider the two as distinct sectors subject to their own market adjustments and specific policies. Based on Belgian data, this column argues that the most successful manufacturing firms thrive through selling services that are associated with their goods. Services increase the appeal of a firm’s products, thus allowing it to sell more and at higher prices in international markets. Considering goods and services separately in trade agreement negotiations is likely to miss part of the business and welfare gains and losses. 

Ufuk Akcigit, Yusuf Emre Akgündüz, Seyit Mümin Cilasun, Elif Ozcan-Tok, Fatih Yılmaz, 27 November 2019

Numerous empirical studies have shown a decrease in business dynamism in the US and other high-income countries in the last decades. This column investigates the case of the Turkish manufacturing sector. Results indicate that business dynamism in the sector has declined since 2012. Market concentration and exit rates have risen, and new business creation, the labour share in output and economic activities of young firms have fallen. Using an endogenous growth framework, it argues that the inability of follower firms to credibly challenge market leaders is a likely reason, brought on by a lack of access to finance.

Christoph Boehm, Aaron Flaaen, Nitya Pandalai-Nayar, 15 August 2019

What has caused the rapid decline in US manufacturing employment in recent decades? This column uses novel data to investigate the role of US multinationals and finds that they were a key driver behind the job losses. Insights from a theoretical framework imply that a reduction in the costs of foreign sourcing led firms to increase offshoring, and to shed labour.

Fariha Kamal, 07 July 2019

‘Factoryless’ goods producing entities outsource physical transformation activities while retaining ownership of the intellectual property and control of sales to customers. Using 2012 data from the US Census Bureau, this column provides a new conceptual definition of factoryless activity. It also compares factoryless goods producer firms to service providers outside the manufacturing sector, and hybrid manufacturers to traditional manufacturers within the manufacturing sector. The analysis reveals several meaningful correlations between factoryless status at the firm level and conceptual variables such as employment mix, innovation, and importing activities.

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.



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