Testing The Validity Of De-Industrialization Hypothesis For E-7 Countries: An Empirical Analysis
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https://doi.org/10.5281/zenodo.8364571Keywords:
Deindustrialization Hypothesis, E7 Countries, Panel Analysis, Causality TestAbstract
The deindustrialization hypothesis means that there is no causal relationship between a country's public expenditures and openness indicators econometrically, which was brought to the literature by Iverson and Cusak (2000). In addition, the concept of deindustrialization is also expressed as the increase in the share of employment in the agriculture and service sectors by decreasing the share of employment in the industrial sector in total employment over the years. In this context, the validity of the deindustrialization hypothesis was tested in the E7 countries (China, India, Brazil, Russia, Mexico, Indonesia and Turkey). ECM (Error Correction Model) panel cointegration test was applied to the series that became stationary with the Hadri-Kurozumi (2012) panel unit root test and it was seen that there was a cointegrating relationship between the variables in the long run. Canning and Pedroni (2008) causality test was applied to test the criterion of no causality relationship between the variables in which the validity of the deindustrialization hypothesis is understood econometrically. According to the findings, it was concluded that the industrialization hypothesis is valid only in Indonesia among the 7 developing countries with rapid growth rates, and the hypothesis is not valid in the other 6 countries, including Turkey.
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