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(De)Industrialization, Technology and Transportation

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Abstract

The transition from a traditional, constant returns technology to modern, increasing returns methods of production in manufacturing not only widens the scale of production but more crucially, it enhances product quality. Such a quality improvement consists mainly in a much higher level of transportability. The fact that products become “lighter” and easier to carry opens foreign markets to manufacturers thereby supporting larger scales of production. We model this situation through a one-stage game where firms distributed across two countries select technologies and fob mill prices. Contrasting with the Big Push approach, such a game is never a coordination game. In addition to cases where all firms adopt either modern or traditional technologies, the standard outcome is an asymmetric situation, where the modern firms in a country eliminate traditional units in the other country. Starting from a situation where all productive activity is traditional, deindustrialization can be viewed as a situation where firms in a country switch to more modern technologies while industrial units in the other country are unable to participate in this movement.

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Notes

  1. For empirical evidence, see for instance Singh (1977), Crafts (1996), Saeger (1997), Kucera and Milberg (2003), Dasgupta and Singh (2006), Nickell et al. (2008), Buera and Kaboski (2009), Lawrence and Edwards (2013), Brakman et al. (2015), Rodrik (2016), Bernard et al. (2017) and Kang (2017).

  2. Our inquiry is also related with “export-led growth” theories, starting with Pred (1966). It introduces in addition an endogenous determination of the size of the exporting sector within the overall economy.

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Acknowledgements

José Pedro Pontes is a member of UECE (Research Unit on Complexity and Economics), which sponsored the research contained in this article. In turn, UECE is financially supported by FCT (Fundação para a Ciência e a Tecnologia), Portugal. This article is part of the Strategic Project (UID/ECO/00436/2019).

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Authors and Affiliations

  1. Centre for Applied Research at NHH (SNF), Helleveien 30, 5045, Bergen, Norway

    Armando J. Garcia Pires

  2. Instituto Superior de Economia e Gestão, University of Lisbon, Rua Miguel Lupi 20, 1249-078, Lisbon, Portugal

    José Pedro Pontes

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  1. Armando J. Garcia Pires
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Correspondence to Armando J. Garcia Pires.

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Garcia Pires, A.J., Pontes, J.P. (De)Industrialization, Technology and Transportation. Open Econ Rev 32, 527–538 (2021). https://doi.org/10.1007/s11079-020-09600-8

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