Structural transformation in emerging economies: An empirical investigation on premature deindustrialization

The concept of structural transformation in development theories refers to an economic transformation that includes industrialization and deindustrialization, respectively. It is known that countries primarily experience industrialization process with their economic growth, and after reaching a certain level of prosperity, they enter the process of deindustrialization and focus on the service sector. On the other hand, it is known that discussions on the concept of "premature deindustrialization" have arisen in recent years, which indicates that some economic problems may arise in developing countries due to the earlier deindustrialization processes compared to developed countries. In this direction, it is important to investigate whether the deindustrialization in question is a premature deindustrialization together with the validity of deindustrialization in a country. In this study, it is aimed to examine the validity of deindustrialization and premature deindustrialization in high income developing countries. For this purpose, the validity of deindustrialization has been examined through panel data methods that allow structural breaks in nine emerging economies (Argentina, Brazil, China, Indonesia, India, South Africa, South Korea, Mexico and Turkey) for the 1970-2019 period. Then, the validity of premature deindustrialization is also investigated by examining the effects of the said transformation on the national economies in countries where deindustrialization is valid, using the method of asymmetric causality. In the study, it is found that deindustrialization is valid for Indonesia, South Africa, South Korea and Turkey. Furthermore, it is also concluded that premature deindustrialization is valid for South Africa. Keywords: Deindustrialization, Premature Deindustrialization, Emerging Economies, Panel Data, Asymmetric Causality