The effect of premature deindustrialization fact on economic development

This study addresses the critical role of industrialization in economic development processes and the risk of premature deindustrialization faced by developing countries. While it is widely accepted in the literature that the manufacturing industry is the engine of growth, as countries reach a certain level of industrialization, the share of industry in employment and income begins to decline, while the share of the services sector increases. This process, referred to as deindustrialization, does not pose significant problems for developed countries; however, it can trigger certain adverse outcomes for developing countries. Specifically, developing countries experience deindustrialization before reaching a sufficient level of maturity (prematurely). This process, experienced by these countries, is referred to in the literature as "premature deindustrialization." In this context, the study compares the industrialization trajectories of selected middle-income industrial countries with those of high-income industrial countries and examines the phenomenon of premature deindustrialization through panel data analyses. The findings reveal that middle-income industrial countries are at risk of premature deindustrialization. The study emphasizes the necessity for these countries to restructure their industrial policies to avoid premature deindustrialization and make their industrialization processes sustainable. In this regard, industrial policies focusing on specialization in manufacturing products, accelerating the transition to medium- and high-technology products, reducing dependence on primary sectors, and achieving competitive advantages in high-technology product exports gain importance.