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De-industrialization and the Varieties of Growth Regime: Régulation Approach to International Comparative Analysis 脱工業化と成長体制の多様性：国際比較分析へのレギュラシオン・アプローチ

Hiroyasu Uemura（植村博恭） Yokohama National University（横浜国立大学）

and Shinji Tahara（田原慎二）

Economic and Social Research Institute, Japanese Cabinet Office

（内閣府経済社会総合研究所）

1. Introduction In all the advanced economies, de-industrialization has occurred since the 1970s.

De-industrialization is usually defined as the relative decline in output and employment in the manufacturing industry, which is observed universally not only in European economies but in all the advanced economies. In the Japanese case, in particular, de-industrialization has accelerated very rapidly, faced with institutional changes in the domestic economy and changes in the international economic relations. Furthermore, de-industrialization has exhibited different patterns with varieties of European capitalism.

In this study, we analyze the transformation of growth regime and changes in industrial and employment structures to understand the structural characteristics of de-industrialization in Japan and the following European countries: Germany, France, Italy, and the UK. We attempt to extend the theoretical framework of the growth regime in the régulation theory, taking account of long-term industrial structural changes. In particular, changes in macroeconomic patterns and industrial structures are analyzed with World Input-Output Database (WIOD).

In our analysis, we follow three specific themes. First, we analyze the growth processes and de-industrialization in Germany, France, Italy, UK and Japan, focusing especially on changes in institutional forms and the transformations of growth regime from the viewpoint of régulation theory (Petit 1986, Boyer 1988).1

1 “De-industrialization” has been studied in many European countries since the 1980s (Petit

1986, Rowthorn and Wells 1987, Rowthorn and Ramaswamy 1990). Furthermore, “de-industrialization” has been studied in the framework of the régulation theory in Japan. For example, see Uemura (1991), Harada (1997, 2007), Tahara (2009, 2010, 2011), Uemura and Tahara (2014).

Second, we analyze structural linkages between the manufacturing industry and the service industry to understand the characteristics of de-industrialization in each economy. In this regards,

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we extend the method of the analysis of de-industrialization based on input-output Analysis that was developed by Franke and Kalmbach (2005) to analyze the German economy. In particular, we use World Input-Output Database (WIOD) in our structural analysis of de-industrialization. Third, we consider the institutional implication of de-industrialization and the increase in various service activities with the varieties of capitalism.

2. Theoretical Framework of De-industrialization 2.1 Dynamics of the Growth Regime and De-industrialization De-industrialization should be analyzed in the framework of economic growth and industrial structural change. In the process of economic growth, the dynamic interaction of demand and supply factors plays an key role, and the interaction of real and financial factors influences the dynamics of the economy. Furthermore, industrial structural change should be integrated in the analysis of economic growth, especially when we consider the process of de-industrialization. In this regard, the industrial structural change is formalized effectively by the input-output analysis.

Base on this theoretical framework, we explain the dynamics of the growth regime

and de-industrialization from the perspective of the régulation theory (Petit 1986; Boyer

1988). First of all, the cumulative effect of productivity growth and output growth

determines the dynamism of a growth regime. This effect operates more strongly in the

manufacturing industry (Kaldor 1978). The framework of cumulative growth and

de-industrialization is depicted in Figure 1.

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The main logic of demand formation is as follows. Productivity gains are distributed into wages and profits, and an increase in profits has a positive effect on the expected profit rate and investment. Then, an increase in investment realizes more profits. Therefore, there is cumulative casualty between the profit rate and the accumulation rate. Furthermore, investment leads to an increase in intermediate inputs from either manufacturing sectors or the service sectors. At the same time, an increase in wages leads to more consumption demand (Rowthorn 1982; Taylor 1991). The markets of consumer durable goods and consumer services expand accordingly.

Next, there is a linkage effect from consumption to investment. This consists of both short-period and long-period effects. As for the former effect, changes in demand influence investment through the adjustment of capacity utilization in the manufacturing industry. As for the latter effect, a continuous expansion of consumption influences the expected return of investment, leading to a continuous increase in investment. In the actual process of investment decision, these effects are integrated in the decision to investment. The accumulation rates are not uniform across the industries as profitability differentials exist at the industrial level. In this context, there exist two patterns of demand formation, depending on the patterns of coordination in the financial system and wage-labor nexus. If investment is highly sensitive to profits, the causal chain called “profit-led growth”: profits-investment-economic growth is realized. On the contrary, if investment is very sensitive to demand expansion, the casual chain called “wage-led growth”: wage-consumption-investment-economic growth is realized. Furthermore, the causal chain: productivity-unit labor costs-export plays a crucial role in the growth of the manufacturing industry, which is the logic of “export-led growth”.

In summary, all of these linkages from productivity gain to demand formation are called the “ demand regime” in the régulation theory (Boyer 1988). The demand regime can be expressed in the following way.

where y is a final demand vector and λ is a labor productivity vector. Demand vector y is divided into three components: domestic final demand vector dfdy , export vector exy , and import vector imy . Final demand vector is further divided into consumption vector cony , investment vector invy , and government spending vector govy .

imexdfd yyyy ∆∆∆∆ −+=

)( λ∆∆ fy =

)2(

)1(

imexgovinvcon yyyyy ∆∆∆∆∆ −+++=

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Each of the components can be regarded as a function of productivity growth. Furthermore, final demand induces intermediate demand, which can be studied by the input-output analysis. In our framework of input-output analysis, input coefficient matrix A is divided into the matrix of domestic input ratios H and technological coefficient matrix ∗A by following the framework by Franke and Kalmbach (2005), as follows.

In other words, the input coefficient matrix is the Hadamard product of the matrix of the

domestic shares of intermediate inputs and the matrix of technological coefficients.

This can distinguish domestic intermediate inputs and foreign intermediate

inputs into the production process. By using the Leontief inverse matrix, 1)( −−= AIB ,

and Equation (1), the increase in the output vector can be calculated from the final demand vector, technological coefficient matrix, and domestic intermediate inputs, as follows.

where x is the output vector, the suffixes are period 0 and period 1, and x∆ shows the increase in output from period 0 to period 1, and the suffixes are the period 0 and the period 1. The first item shows the output change caused by final demand change. The third item shows the output changes caused by a change in technological coefficient. The fifth item is the output change caused by a change in domestic intermediate inputs. Furthermore, the second, fourth and sixth items are the output changes caused by the residual. Therefore, the output can be divided into eight factors: consumption, investment, government spending, export, import, technological change, domestic intermediate inputs, and the residual.

where RES is the residual. Furthermore, dividing each item by the output x at period 0, we obtain the contribution of each components to the output growth. The advantage of

[ ]0001000

00011000

010

))(()(

)()()(

)(

xAHBBxAHBxAHBAHBxAHB

yBByBx

∗∗

∗∗∗

−++

−++

−+=

∆∆

∆∆∆

∆∆∆

RESxAHBxAHBfBfByByByBx imexgovinvcon +++−+++= 0*000

*0000000 )()( ∆∆∆∆∆∆∆∆

)5(

)6(

∗= AHA

∗= ijijij aha ・ nji 2,1, = )4(

)3(

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this framework is the fact that this makes us to consider the transformation of growth regime on the basis of the analysis of changes in these components.

Next, the linkage from demand growth to productivity growth is another major causal chain in the economy. An increase in investment leads to an increase in productivity by replacing capital equipment. This effect is more remarkable in the manufacturing industry than the service industry with the dynamics of introducing new capital equipments and scrapping old capital equipment. Furthermore, an increase in demand leads to productivity growth through increasing return to scale especially in the manufacturing industry. This is often called the “Kaldor-Verdoorn Law”. In addition, innovation contributes to productivity growth depending on the social system of innovation in each national and regional economy (Amable, Barré and Boyer 1997). In summary, these linkages from demand growth to productivity growth are called “the productivity regime” (Boyer 1988).

As for the linkages between the manufacturing and the service industries, which

are reflected by the input coefficient matrix A , the following theoretical points are usually noted in the study of de-industrialization (Petit 1986). First, cumulative causation between output growth and productivity growth operates strongly in the manufacturing industry. Second, the manufacturing industry has its own “subsystem dynamics” (Landesmann and Scazzieri 1996)) and causes changes in the linkage between the manufacturing industry and the business-related service industry with the externalization of business activities, which are reflected by the technology coefficient matrix ∗A . The spillover effect of intermediate demand between the manufacturing and service industries contributes to output growth and productivity growth in both industries.

The dynamism of output growth and productivity growth determines employment growth, which provides a basic framework of de-industrialization in terms of employment.

where N̂ is the vector of employment growth rates ( ) , x̂ is the vector of output growth rates ( ), and λ̂ is the vector of productivity growth rates ( ).

Therefore, in a matured economy in which the percentage of agricultural employment has become very small, de-industrialization occurs in terms of the relative

λ̂ˆˆ −= xN

)( xf ∆λ∆ = )7(

)8(

jijij NNN ∆=ˆ

jijij xxx ∆=ˆ

jijij λλ∆λ =ˆ

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share of employment when the growth rate of real output minus the growth rate of productivity in the service industry is bigger than that in the manufacturing industry. This dynamics was formalized originally by Baumol, and was applied to the process of de-industrialization in Rowthorn’s model of de-industrialization (Baumol 1967; Rowthorn and Wells 1987). De-industrialization brings about an increase in service employment with a skill bifurcation, depending on institutional characteristics in the labor market, and this shift of employment influences the transformation of the social welfare system in each county. (Emmengger, Häusermann, Palier and Seeleib-Kaiser eds. 2012).

Furthermore, foreign trade and foreign direct investment have some important effects on the de-industrialization process. Trade specialization between manufactured goods and services influences the dynamism of the national economy, influenced by the exchange rate system . For example, the export goods manufacturing industry could be a starting point of “cumulative causation,” producing tradable products with the increasing return to scale. On the contrary, if the national economy depends significantly on export of natural resources, this could exacerbate long-term economic stagnation. The pattern of trade specialization causes a “virtuous circle” or “vicious circle” with the conflict of interests among different industrial sectors. Foreign direct investment sometimes has both the positive effect of promoting the international division of labor and the negative effect of accelerating de-industrialization.

2.2 Four Types of De-industrialization The condition for de-industrialization in terms of employment is usually explained by focusing on the difference between the growth rate of real output and that of labor productivity (Baumol 1967, Rowthorn and Wells 1987). In this study, by focusing on interdependent industrial structures between the manufacturing service sectors, we define four types of de-industrialization. The first type is “positive de-industrialization”, in which the growth differentials of labor productivity between the manufacturing sector and the service sector bring about a shift in employment from the manufacturing sector to the service sector. The second type is “negative de-industrialization”, which is caused by decreasing demand and stagnant output in the manufacturing sector. These two types were formalized originally by Rowthorn and Wells (1987). Moreover, the third type is “de-industrialization through manufacturing-service linkages”, which is brought about by an increase in intermediate inputs from the business-related service industry to the manufacturing industry, inducing an increase in employment in the business-related service industry. The fourth type is “de-industrialization by the shift of

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final demand to the service sector,” which is included the long-term changes in final demand structures. These four types of de-industrialization are summarized in Table 1. 3. Comparative Analysis of De-industrialization in EU-Japan 3.1 Overview of De-industrialization Patterns

De-industrialization has proceeded in most of the advanced countries since the 1970s, and especially after the 1990s, it accelerated in some countries owing to financial globalization and increasing international production linkages. Thus, de-industrialization has shown different features with different types of capitalism, depending on the institutional arrangements of the economy. However, there are few studies that develop the analysis of the relationship between the varieties of capitalism and the different patterns of de-industrialization.

According to the study by Amable (2003), five types of capitalism can be identified: “market-based capitalism”, “social-democratic capitalism”, “Asian capitalism”, “continental European capitalism” and “Mediterranean capitalism”. These different types of capitalism have different institutional arrangements and institutional complementarity in product markets, wage-labor nexus, the financial sector, social protection, and education. Taking account of Amable’s typology, our comparative analysis of de-industrialization focuses mainly on countries with different types of advanced capitalism, as follows: Germany and France (continental European capitalism), Italy (Mediterranean capitalism), the UK (market-based capitalism) and Japan (Asian capitalism).We investigate how different varieties of capitalism with different institutional arrangements show different patterns of de-industrialization and have different political-economic consequences.

Table 1　Four Types of De-industrialization

Manufacturing Service Manufacturing Service Manufacturing ServicePositive de-industrialization

increase orconstant ー

considerablyincrease ー

constant ordecrease

increase

Negative de-industrialization

decrease ー ー ー decrease increase

de-industrializationthroughmanufacturing-service linkages

increas increase ー ー ー increase

de-industrializationby the shift of finaldemand to theservice sector

ー increase ー ー decrease increase

Note: (-) shows that the direction cannot be determined.

Output Labor Productivity Employment

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Figure 2 Growth Rates of Real Output

Source: WIOD 2014.

Figure 3 Unemployment Rate

Source: Eurostat.

Figure 4 Industrial Stractural Changes:Germany, France, Italy, UK and Japan

0.0

5.0

10.0

15.0

1995 2000 2005 2010

% Germany France Italy UK Japan US

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We overview the patterns of these advances economies. Figure 2 and 3 shows real growth rates and unemployment in Germany, France, Italy, the UK, Japan and the US, and Figure 4 identifies industrial structural changes in terms of employment in these counties. De-industrialization has occurred universally in all of these advanced countries. In particular, the ratios of service employment are very high in the US, the UK and France, and de-industrialization has accelerated recently in Germany and Japan.

In order to investigate the pattern of de-industrialization, we use a more detailed classification of industrial sectors, shown in Table 2, in which “the export core manufacturing” industry is defined as that showing more than 20% exports per unit of output in each country.

According to the industrial classification in Table 2, the employment shares of

“export core manufacturing”, “financial services”, “business-related services”, “consumer services” and “public services” are shown seen for Germany, France, Italy, the UK, Japan and the US in Figure 4. Different structural patterns are observed among these countries. The ratio of “export core manufacturing” is very high in Germany which is a core exporter in EU. On the contrary, the ratio of “financial services” is relatively high in the UK and the US, which are typical “market-based capitalism” countries, where financialization has proceeded very rapidly. In this regard, the growth pattern in each country is reflected by types of capitalism and the pattern of de-industrialization. As for “business-related services”, the ratio has been high in the UK and France, and it has been increasing in Germany and Japan. According to

Table 2 Industrial Classification for the Analysis of De-industrialization

1 AgricultureAgriculture, Forestry, Fisheries, Livestock and sericulturefarming

2 Export coremanufacturing

Transportation equipment, General Machinery, Electronic andelectrical equipment,etc. (Export/output ratio is more than 20%in each country)

3 Othermanufacturing

Other manufacturing industries than the export core

4 Other industries Construction, Electricity and Gas, Water supply, Mining

5 Financial services Financial intermediary services

6 Business-relatedservices

Rental of office equipments and goods, Advertisement,Information services and internet-based services, Wholesale,Research, Telegraph and Telephone, Mail, Transportation

7 Consumer servicesRetail, Insurance, Real estate, Tranportation, Broadcasting,Entertainment, Eating and Drinking Places, Accomodation

8 Public services Education, Medical, Hygiene

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researche by Franke and Kalmbach (2004) and Uemura and Tahara (2014), “export core manufacturing” and “business related services” have very strong linkages in Germany and Japan . Both countries are “Coordinated Market Economy (CME) (Hall and Soskice (eds.) 2001). When analyzed more closely, however, they have different institutional arrangements as different types of capitalism, even though they show rather similar patterns of de-industrialization. Furthermore, the ratio of “public services” is relatively high in the US and France, and also has been increasing very rapidly in Japan. The “public services” industry plays the role of employment absorber in the process of de-industrialization (Iversen and Cusack 2000). Especially, “negative de-industrialization” is often compensated by the expansion of “public services”, which causes the political problem of increasing public debt.

Figure 5 Share of Employment

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3.2 Comparative Analysis of Growth Regime and De-industrialization Before we conduct the international comparative analysis of de-industrialization, we review our framework of analysis which integrates quantitative analyses of growth regime and de-industrialization. From equations (6) and (8), we obtain the following structural relations which are used in our empirical analysis.

(the growth rate of real output) = (the contribution of final demand) ＋ (the contribution of export) ― (the contribution of import) ＋ (the contribution of technological coefficient) ＋ (the contribution of domestic input) ＋ (residual)

(the growth rate of employment) = (the growth rate of real output）― (the growth rate of labor productivity)

Based on these equations, a comparative analysis of de-industrialization is conducted for the UK, Germany, France, Italy, the UK and Japan. The period of the analysis is from 1995 to 2009 owing to the data limitations of WIOD.2

The results of the input-output analysis of de-industrialization are summarized in Table 3, which shows the components of real output growth, the growth rate of labor productivity and the growth rate of employment. We can identify the transformations of the growth regime and the different patterns of de-industrialization in each country.

During this period, the Euro was established as a single currency for most EU countries in 1999, and resulted in a large trade imbalance between Germany (“continental capitalism”) and Italy (“Mediterranean capitalism”), amplifying the heterogeneity of the Euro zone economies. In 2008, the subprime crisis hit all the European economies, followed by the Euro crisis in 2011. The Euro crisis exacerbated sovereign debt crisis in the Southern European economies, causing governance problems in European integration (Boyer 2013; Majone 2014). The subprime crisis also influenced the Japanese economy, which was, moreover, damaged by the Great East Japan Earthquake in 2011 (see Figure 2). In this situation, Japanese firms are shifting their productive activities to East Asian countries.

2 The data of WIOD are calculated in Dollars, so we must convert the data into those in the real term by using “the double inflation method”.

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Table 3 Decomposition of Real Output Growth

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Source: WIOD 2014 In the following part of this section, the results of the analysis of the growth regime and the pattern of de-industrialization are explained for Germany, France, Italy, UK and Japan in reference to their specific institutional arrangements to respond to economic fluctuations and crises.

(1) Germany (continental European capitalism) Germany has large competitive firms with an institutionally coordinated system of

employment and skill formation in the strong manufacturing sector with high competitiveness, which exports final and intermediate goods to other EU member countries and the rest of the world.

1995-2000： Led by a large increase in export demand, “the export core manufacturing” industry realized high rates of output growth and productivity growth , exhibiting cumulative growth. As a result, employment decreased only slightly, and very weak “positive deindustrialization” occurred. Furthermore, the growth of “the business-related services” occurred mainly by the technological coefficient effect, leading to an increase in employment. Therefore, the German economy remarkably exhibited “de-industrialization through manufacturing-service linkages”, which corresponds to the analysis of Franke and Kalmbach (2005). .

2000-2005: After the Euro was introduced as a single currency in 1999, export

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demand increased continuously, even though it was counterbalanced by imports of final and intermediate goods in Germany. Therefore, “the export core manufacturing” showed high growth rates, and “positive de-industrialization” proceeded in the German economy. Moreover, the growth of “consumer services” was weak due the low level of consumption, and “public services” absorbed employment, putting pressure on the German welfare state.

2005-2009： The “export core manufacturing” industry, hit by the subprime crisis, showed negative growth, which is very exceptional in the German economy. At the same time, output fell in “the other manufacturing” industry mainly due to a decrease in consumption, too. Therefore, “negative de-industrialization” occurred in Germany in this period. Even in this situation, “business-related services” retained sufficient employment-absorption capacity by absorbing workers who were released from the manufacturing sector. This caused a decrease in the unemployment rate even in the recession (see Figure 2 and 3).

(2) France (continental European capitalism) France has various kinds of manufacturing industry and a relatively competitive

agricultural sector. In addition, it has strong institutional regulations for wages and unemployment assistance in the labor market.

1995-2000: In the French case, export demand was very strong for “the export core manufacturing” industry and “the other manufacturing” industry, which brought about high rates of output growth and productivity growth, and thus, cumulative growth. As a result, employment decreased only slightly, and very weak “positive deindustrialization” proceeded. Furthermore, the growth of “the business-related services” occurred mainly by an increase in final demand as well as technological coefficient effects, which led to an increase in employment. In other words, “de-industrialization through manufacturing-service linkages” was relatively weaker in France than Germany. Furthermore, the “public services” supported by sufficient consumption demand absorbed employees in the French welfare state.

2000-2005: Even after the establishment of the Euro in 1999, export demand was continuously high, although it was counterbalanced strongly by large amounts of imports of final and intermediate goods. Therefore, “the export core manufacturing” showed high growth rates, and “positive de-industrialization” occurred. All the service industries, “financial services”, “business-related services”, “consumer services” and “public services” were supported by sufficient consumption, and continued to absorb employment in France.

2005-2009: The effect of the subprime crisis was relatively mild in France, and “the export core manufacturing” industry and “the other manufacturing” industry maintained positive growth rates. Therefore, in those industries, “positive de-industrialization” continued with a slightly increased unemployment rate (see Figure 3). At the same time, “agriculture” maintained competitiveness with an increase in domestic consumption demand and export demand, showing relatively higher growth rates of output and labor productivity. This pattern in the agriculture industry is a typical feature in France.

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(3)Italy (Mediterranean capitalism) Italy has a large number of heterogeneous small and medium-sized firms in the

manufacturing and consumer service industries. The labor market is less flexible with workers having diversified skills, and industries with low productivity play a role of absorbing employment.

1995-2000: Output growth was maintained firmly in “the export core manufacturing” industry, “the other manufacturing” industry and “the other industry”, while productivity growth was not as high in these industries. Therefore, de-industrialization was mitigated by a sufficient growth of output in the Italian economy. A very remarkable feature of the Italian economy is the fact that productivity growth was relatively low in the manufacturing industry. While “financial services” and “business-related services” were expanding, productivity growth remained very low, especially in “business related-services”.

2000-2005: After the Euro was established as a single currency in 1999, “the export core manufacturing” industry lost its international competitiveness, and exhibited negative growth rates. The main cause of the sharp fall was stagnant export demand and sharply increased imports. In this period, the transformation of the growth regime occurred alongside an increasing trade deficit in Italy. Under this condition, productivity growth was low in “the export core manufacturing”, and thus, mildly “negative de-industrialization” proceeded in the Italian economy.3

2005-2009: “The export core manufacturing” and “the other manufacturing” industries showed negative growth rates in output as well as labor productivity, and thus, strongly “negative de-industrialization” occurred in the Italian economy. In this situation, workers were absorbed by “consumer services” and other private services, which are traditionally an employment sponge. Generally, the private service industries play an important role in absorbing employment in the Italian economy, even while causing a very sharp increase in the unemployment rate (see Figure 3).

(4) The UK (market-based capitalism) De-industrialization started in the UK early in the 1950s, and has accelerated since

the structural crisis of the 1970s (Rowthorn and Wells 1987). Furthermore, “financial services” and “business-related services” have expanded rapidly in tandem with financial liberalization and deregulation which were brought about by neo-liberalist policies after the 1980s.

1995-2000: While “the export core manufacturing” industry, “the other manufacturing” industry and “the other industry” grew firmly owing to the increase in consumption demand and export demand, productivity growth was higher than output growth. Therefore, “positive de-industrialization” occurred in this period. Moreover, output and employment grew in “financial services”, “business-related services”, and 3 After the Euro was established in 1999, the trade imbalance expanded between Germany and southern European counties expanded rapidly. In this situation, the Euro system made de-industrialization accelerate, causing severe unemployment problems, in the southern European economies (see Boyer 2013). De-industrialization has been influenced strongly by the currency system in Europe.

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“consumer services”. However, productivity growth was so high in “financial services” and “business-related services” that employment growth in these sectors was rather modest in the British economy.

2000-2005: This includes a time of recession in the British economy, and output and employment fell considerably in “the export core manufacturing” due to a fall in export demand. Therefore, “negative de-industrialization” occurred in “the export core manufacturing” and “the other manufacturing”. In this period, “financial services” did not grew sufficiently, so employment was absorbed sufficiently by only “public services”.

2005-2009: The subprime crisis hit the British economy in 2008, and “financial intermediary services”, “business-related services” showed low growth rates owing to a sharp fall in final demand and export demand. Furthermore, productivity growth was negative in many industries, so the British economy exhibited very strong “negative de-industrialization” in this period. This shows that the British economy is relatively vulnerable to a financial crisis.

(5) Japan (Asian/innovation-led capitalism) Large firms in “the export core manufacturing” industry have played a very crucial role in Japan, supported by their subcontracting networks. The externalization of business activities and workers from the manufacturing sector to the service sector was very remarkable in tandem with increasing non-regular workers in the labor market after the recession in the 1990s, and this has caused increasing inequality in the Japanese economy. .

1995-2000: Even in the long-lasting recession of the 1990s, output increased in “the export core manufacturing” industry with sufficient export demand, which was a sharp contrast to the negative growth of output in “the other manufacturing” and “the other industry”. Accordingly, “positive de-industrialization” proceeded in “the export core manufacturing” industry , while “negative de-industrialization” occurred in “the other manufacturing” and “the other industry”. Furthermore, “business-related services” and “public services” grew steadily in terms of output and employment. Especially, the growth of “public services” was supported by government spending. Strong linkages between “the export core manufacturing” sector and the “business-related service” sector showed a similar pattern to that in the German economy (see Uemura and Tahara 2014).

2000-2005: This period includes a recovery process from the long-lasting recession, “the export core manufacturing” industry exhibited very high output growth and productivity growth, leading to “positive de-industrialization”. The growth of labor productivity was enhanced by the externalization of business activities and workers to “business-related services”. Furthermore, both output and employment increased in “financial services”, “business -related services” and “public services”. In this regards, a new growth pattern emerged in the first half of the 2000s, but this did not realize a new and stable growth regime. In this situation, new rules and mechanisms of coordinating Japanese firms’ overseas activities and domestic structural changes were not established. . .

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2005-2010: When the subprime crisis hit the Japanese economy in 2008, the growth of “the export core manufacturing” industry became stagnant, and “the other manufacturing” and “the other industry” showed negative growth rates due to a sharp fall in investment demand. Accordingly, the Japanese economy exhibited overall “negative de-industrialization”. In this situation, “financial services” and “business-related services” also showed negative growth rates, and their labor productivity fell sharply. As result, employment was relatively maintained via intrinsic institutional mechanisms in the Japanese labor market, even though many non-regular workers were fired. In this situation, “public services” absorbed employees, keeping the unemployment rate relatively low (as seen in Figure 3), but this caused severe problems for public finance.

In summary, we can point out three important aspects for studying de-industrialization in advanced economies from our research results in the international comparative analysis. First, it is important for socio-economic studies to identify what types of de-industrialization have proceeded in certain industries, and in particular, whether the patters are “positive” or “negative”? This depends on the varieties of the growth regime at different times and places in the development of capitalism. Second, the strength of manufacturing-service linkages determines the pattern of output-employment dynamics in both sectors and the nature of conflict among domestic political groups. Very strong linkages are observed in Germany and Japan, where large manufacturing firms dominate the economies and have some common interests with firms in the business-related service industry. Third, we should carefully investigate which service sectors absorb workers who have been released from the manufacturing sector. Are they private services or public services; large firms or small and medium-sized firms? As mentioned in the country-specific analyses above, different service sectors absorb workers in Germany, France, Italy, the UK and Japan. In general, “public services” absorbed workers in the process of de-industrialization, but this has been influenced by the recent transformation of the welfare state, which causes more dualistic structures in these countries (Emmenegger, Häusermann, Palier and Seeleib-Kaiser eds. 2012; Schäfer and Streek eds. 2013; Thelen 2014).

5. Conclusion The theoretical framework of de-industrialization was explained from the viewpoint of the régulation theory, and the comparative analysis of de-industrialization was conducted for Germany, France, Italy, UK and Japan. Referring the political-economic implication of de-industrialization, the results of our analysis can be summarized as follows.

First, de-industrialization in terms of employment is seen universally in all the advanced economies, but each economy shows different features, depending on its pattern of capital accumulation, institutional arrangements and international economic relations. In particular, the employment dynamics at the industrial level is produced in

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the framework of “the growth regime” which is determined by dynamic interactions between “the demand regime” and “the productivity regime” as suggested by the régulation theory.

Second, four types of de-industrialization are formalized theoretically. These are “positive de-industrialization”, which occurs via productivity growth differentials between the manufacturing and the service sectors; “negative de-industrialization” which is caused by stagnant output in the manufacturing sector; “de-industrialization through manufacturing-service linkages”, in which services are increasing intermediate inputs to the manufacturing sector ; “de-industrialization caused by the shift in final demand to services”. The different logic of de-industrialization is often dominant on different varieties of capitalism in different periods.

Third, the employment ratios of “financial services” and “ consumer services” are high in the UK and the US which are usually characterized as “market-based capitalism”. Especially, de-deindustrialization proceeds in tandem with financialzation in these countries. The employment ratio of “export core manufacturing” is relatively high in Germany and Japan, even though it has been falling continuously in the positive de-industrialization process. “Public services” are relatively large in the US and France, and they have been increasing rapidly in Japan.

Fourth, based on input-output analysis, different patterns of de-industrialization are identified in different countries. In Germany, “the export core manufacturing” industry has grown with a high growth rate of labor productivity, which causes “positive de-industrialization” with strong linkages between “export core manufacturing” and “business-related services”. In France, the manufacturing industry has shown steady growth, which has brought about “positive de-industrialization”. In Italy, especially after the Euro was established as a single currency, “the export core manufacturing” and “the other manufacturing” industries showed negative growth rates with increasing imports, but the growth of labor productivity was also very low. Therefore, this caused only slightly “negative de-industrialization” in Italy. In the UK, “financial services” and “business-related services” grew with high productivity in the boom period, while “the export core manufacturing” industry often showed negative growth, exhibiting “negative de-industrialization”. The Japanese pattern is somewhat similar to the German one with strong linkages between “export core manufacturing” and “business-related services”. Furthermore, the externalization of business activities and workers from the manufacturing industry to the “business-related services” industry becomes very remarkable in the Japanese economy, which causes more instability and inequality in the Japanese labor market. .

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