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Industrial Development Report 2013

Sustaining Employment Growth - The Role of Manufacturing and Structural Change

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The Industrial Development Report 2013 examines the role of structural change and employment and explores the underlying drivers of structural change in manufacturing. While manufacturing employment is growing in developing countries, its decrease in developed countries is being mitigated by the rise in manufacturing-related services employment. The food and beverages and textiles and garments industries offer least developed countries tremendous potential for industrialization, whereas high-tech industries hold numerous opportunities for developed countries to invest and innovate and to thus sustain jobs. The impact of the critical drivers of structural change and industrialization—namely costs, technology, demand and resource efficiency—to sustain employment hinges on the industrial policies adopted. These must therefore be geared towards the structural transformation of the economy and will only be effective if the policy-making process plays as important a role as the policy content.

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Drivers of manufacturing structural change and employment generation

This section first looks at what drives the structural change and industrial development analysed above. The drivers’ interactions are extremely diverse, complex and non-linear but what stands out is that costs, as well as technological and demand conditions, remain crucial. In principle, structural change in any sector in any country is governed by the conditions of demand and supply for products and services that interact with each other. Supply-side conditions generally include wages, skills, technological change, firm size, location of production facilities and the overall business environment, which also determine industry’s competitiveness and organization. Demand-side conditions include demand for imports and exports as well as foreign direct investment.

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