Friday 12 January 2018

Productivity, Manufacturing and Trade

A very interesting piece by Robert Lawrence on manufacturing productivity and trade. Three very interesting conclusions come out: 

(a) that not trade is the major contributor to a decline in the share of manufacturing employment, but faster productivity; 

(b) that therefore productivity growth is in large part the factor that has contributed to losses of manufacturing jobs (together with our habit to not consume more goods but more services when we get richer); and 

(c) that there seems to be a trade-off in recent times between the share of manufacturing employment and productivity growth: more of the one is less of the latter -- or reverse. 

For economists dealing with this topic, the first two conclusions are not entirely new. In fact, this is how I have learned it from my textbook economics. The latter is new to me and very interesting. 

The last conclusions also raises some questions. For instance, is the historical leveling off of economic growth we have seen in the past (i.e. previous wave of globalization) related to this fact? Can new technologies in other sectors such as services we currently seeing reduce this trade-off? 

Some questions to think about. 

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