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Cambridge Journal of Economics 2004 28(5):767-790; doi:10.1093/cje/beh034
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Cambridge Journal of Economics, Vol. 28, No. 5, © Cambridge Political Economy Society 2004; all rights reserved

Commentary

This section is designed for the discussion and debate of current economic problems. Contributions which raise new issues or comment on issues already raised are welcome.

De-industrialisation and the balance of payments in advanced economies

Robert Rowthorn and Ken Coutts*

Address for correspondence: Faculty of Economics, University of Cambridge, Sidgwick Avenue, Cambridge CB3 9DD; email: rer3{at}econ.cam.ac.uk

Abstract

This paper defines de-industrialisation as a secular decline in the share of manufacturing in national employment. De-industrialisation, in this sense, has been a widespread feature of economic growth in advanced economies in recent decades. The paper considers briefly what explains this development and quantifies some of the factors responsible. It then examines the experience of Britain and America, which are two countries that have combined rapid de-industrialisation with a strong overall economic performance. The paper considers both the domestic situation of manufacturing industry in these countries and its foreign trade performance. It concludes by examining in detail the British balance of payments, and documenting how improvements in the non-manufacturing sphere have helped offset a worsening performance in manufacturing trade.

Key Words: De-industrialisation • Balance of payments • OECD economies

JEL classifications: F1, O14, O57

Manuscript received February 16, 2004; final version received April 28, 2004.


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