De-industrialisation and the balance of payments in advanced economies

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. Copyright 2004, Oxford University Press.