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A situation in which an economy begins producing more services than goods. An analyst may say that deindustrialization is occurring when decreases in manufacturing are accompanied by increases in consulting companies. This can be beneficial to some sectors; indeed, some investors look for evidence of deindustrialization to know what industries are likely to be profitable. However, deindustrialization can be detrimental to some workers and regions. For example, as the United States has deindustrialized, the city of Detroit, which is home to many automakers, has lost approximately half of its population, and consistently maintains a high unemployment rate relative to the rest of the country.
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A shift in an economy from producing goods to producing services. Such a shift is most likely to occur in mature economies such as that of the United States. This shift has considerable impact on investors' view of the attractiveness of various industries.
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Deindustrializationclick for a larger image
Fig. 38 Deindustrialization. The distribution of gross national product shows how the industrial sector in advanced economies grows more slowly than the service sector. The figures for industry include those for manufacturing. Source: World Development Report, World Bank, 2004.


a sustained fall in the proportion of national output accounted for by the industrial and manufacturing sectors of the economy, a process that is often accompanied by a decline in the number of people employed in industry (compare INDUSTRIALIZATION).

There is a well-established trend in advanced economies for the industrial sector to grow more slowly than the service sector, as shown in Fig. 38. For the UK, the share of industry in GDP fell from 43% in 1960 to 29% in 2002, while the share of services increased from 54% to 70%. Over the same period, employment in industry in the UK fell from 11.8 million in 1960 to 3.7 million in 2003.

Changes in sector shares may simply reflect changes in the pattern of final demand for goods and services over time, and as such may be considered a ‘natural’ development associated with a maturing economy. On the other hand, deindustrialization that stems from supply-side deficiencies (high costs, an overvalued exchange rate, lack of investment and innovation) which put a country at a competitive disadvantage in international trade (see IMPORT PENETRATION) is a more serious matter. In this case, deindustrialization often brings with it a fall in national output, rising unemployment and balance of payments difficulties.

The extent of deindustrialization in the UK was even more marked in the early 1980s because of Britain's artificially high exchange rate, bolstered by UK oil exports, which caused Britain to lose overseas markets.


Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
At first glance these statements appear to have very little to do with the issue of deindustrialization. Neither quotation employs the term and both concern retail sales rather than industrial production.
The half-life of deindustrialization, a concept pioneered by Sherry Linkon and developed by Tim Strangleman, considers "a past which continues to shape the present and the future." (10) This theorizes a continuing understanding of just employment and the according of importance to working conditions rooted in the expectations of industrial citizenship, albeit without the power to enforce its standards of workforce voice and economic security.
Deindustrialization has also locked many of the millions of Latino immigrants who've come here since 1980 into low-paying service-sector jobs.
Colonial rule did not lead to deindustrialization in the strict sense, as there was no modern industry to begin with.
We see the consequences in the "premature deindustrialization" of the developing world today.
Trends of "premature deindustrialization" and shrinking opportunities, as described in a UNDP report by economist Dani Rodrik, could have special consequences for developing economies.
Once a bastion of steel production worldwide, Pittsburgh suffered from deindustrialization along with other American cities of the "Rust Belt".
In his view, the process of deindustrialization in the period of transition is another setback to export.
Oakridge Executive Chairman and CEO, Steve Barber, long a proponent of the "Onshoring Movement," has previously said in January 2011 in an editorial in Australian Conservative ( that the United States and Australia must reverse the deindustrialization in their economies.
Firstly, the energy crisis has played its role in the premature deindustrialization' in the South Asian region.
Heydemann: Arab autocrats are not going back to the future Steve Heydemann, writing for WaPo's Monkey Cage, argues that "premature deindustrialization" and large-scale structural unemployment naturally leads to the inability of post-Arab Spring authoritarian regimes to generate a new social contract.
Starting with the 1970s, deindustrialization, in many ways the most potent political-economic neologism of the 1980s (Doussard et al., 2009), has swept across advanced industrial economies and has initiated a new cycle of economic transformation (Abu-Lughod, 1999).