Economic Structure: Focus on the Industrial Sector and its Evolution

Universidad del País Vasco

Euskal Herriko Unibertsitatea

Economic Structure

Chapter 3. Part II - The Industrial Sector

• 3.1. INTRODUCTION
• 3.2. DELIMITATION AND CLASSIFICATION
• 3.3. EVOLUTION OF THE INDUSTRIAL SECTOR
• 3.4. PRODUCTIVE AND COMMERCIAL SPECIALIZATION
• 3.5. PRODUCTIVE EFFICIENCY
• 3.6. INDUSTRIAL POLICYemin ta zabal zuzu

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.1. Introduction

• INDUSTRIALIZATION = ECONOMIC GROWTH

" Labour productivity (the basis for the growth of per capita income) is higher in industry (than in backward agriculture or in traditional services) and grows at a faster pace (as it is a sector that is very conducive to incorporating technical progress) The development of agriculture and services depends on the expansion of the industrial sector In advanced societies: growing integration and interrelation of the 3 economic sectors: Agriculture-industry-services Industry has been the foundation of growth and structural change in the Spanish economy (driving force of other sectors) · Industrialization -> Economic growth -> Economic development 2emin ta zabal zazu

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.2. Delimitation and Classification

• · SECONDARY SECTOR OR INDUSTRIAL SECTOR? Secondary Sector = Energy + industry/manufacturing + construction Industrial Sector = manufacturing When we talk about industry or manufacturing, we leave aside the energy and construction sectors (SEC).

• · CLASSIFICATION The different industrial activities can be classified according to demand or supply criteria:

· Demand criteria: based on market dynamics. · Supply criteria: based on the factors that determine productive efficiency and competitiveness. 3emin ta zabal zazu

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.2. Delimitation and Classification

• · CLASSIFICATION · Demand criteria: strong, medium and weak demand activities, depending on the income elasticity of their demand and their growth potential (Product life cycle theory):

  • Strong demand: aerospace, electronics and computers, precision instruments, pharmaceutical products, ... ).
  • Medium demand: chemicals, machinery and mechanical equipment, transport material, ...
  • Weak demand: textiles, footwear, steel, shipbuilding, ceramics, wood, ...

• · Supply criteria: according to the factors that determine its productive efficiency and competitiveness. . Depending on the supply, there are various classifications that can be made. . The one offered by the OECD highlights technological effort over other factors, differentiating between:

  • activities of high technological intensity
  • activities of medium technological intensity
  • activities of low technological intensity 4emin ta zabal zazu

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.2. Delimitation and Classification

• MIXED CLASSIFICATION Combination of demand and supply criteria:

· Advanced Activities (high income elasticity and high technological content): computer, electronic and optical products, electrical material, etc. · Intermediate Activities (medium income elasticity and technological content): chemicals, rubber and plastics, mechanical machinery and transport material, etc. · Traditional Activities (low income elasticity and technological content): food, paper, wood, furniture, textiles and clothing, basic metals, graphic arts, etc. 5emin ta zabal zazu

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.2. Delimitation and Classification

• · CHARACTERIZATION OF SPANISH MANUFACTURES CUADRO 1. Caracterización de las manufacturas españolas hacia 2017

Variación demanda de la Productividad Tamaño medio Estandarización del producto Propensión a exportar Penetración de importaciones Participación en empresas del exterior Participación del Esfuerzo innovador Capital humano (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) AVANZADAS (Demanda y contenido tecnológico altos) 3,1 82,3 22,3 43.4 67,6 77,9 60,0 70,0 48,3 33,9 INTERMEDIAS (Demanda y contenido tecnológico medios) 2,9 88,1 33,4 44,1 60,7 59,9 34,3 44,3 40,9 26,8 Química. 2,9 126,9 34,1 77,1 51,7 55,6 32,6 51,2 55,5 40,9 Caucho y plásticos. 1,9 62,8 22,0 41,2 40,9 42,2 31,3 56,3 30,6 19,1 Maquinaria y equipo mecánico. 2,4 70,8 19,5 39,3 56,2 61,8 44,4 29,6 36,7 24,4 Material de transporte. 3,4 83,1 84,0 21,0 73,3 68,2 31,5 42,6 43,8 19,1 TRADICIONALES (Demanda y contenido tecnológico bajos) 1,5 55,8 8,6 68,8 28,2 27,0 28,1 29,9 18,2 15,1 Metálicas básicas. 2,0 104,8 49,8 52,0 37,0 30,9 20,8 41,7 28,4 14,2 Productos metálicos 0,9 44,7 7,4 32,1 25,2 20,9 40,0 44,0 20,0 15,5 Productos de minerales no metálicos. -- 1,0 63,7 11,7 86,4 39,0 20,9 31,8 22,7 16,9 15,3 Alimentos, bebidas y tabaco 2,3 63,4 14,4 88,7 19,6 15,9 25,0 24,1 19,5 14,5 Papel y artes gráficas. 0,8 57,0 7,0 38,5 19,6 20,4 30,8 46,2 19,8 19,9 Textil, vestido, cuero y calzado. 0,1 36,3 6,5 66,7 90,1 92,1 42,9 14,3 15,0 12,4 Madera, muebles y otras manufacturas. 1,8 47,2 5,5 53,0 19,2 28,7 21,4 21,4 15,3 15,1 Total. 2,0 66,1 11,3 57,3 42,1 42,5 32,6 38,1 24,0 20,9 Notas : (1) Tasa anual acumulativa de variación del consumo aparente en términos reales de 1995 a 2016. (2) VAB por puesto de trabajo en 2016 (miles de euros). (3) Ocupados por empresa en2016. (4) Porcentaje de empresas de más de 200 trabajadores con productos muy estandarizados en 2014-2017. (5) Propensión a exportar en 2016: exportaciones/valor de producción X 100. (6) Penetración de importaciones en 2016: importaciones/consumo aparente X 100. (7) Porcentaje de empresas de más de 200 trabajadores con participación en empresas en el exterior en 2016. (8) Porcentaje de empresas de más de 200 trabajadores con participación del capital extranjero en 2016. (9) Porcentaje de empresas innovadoras en 2016. (10) Porcentaje de ocupados en empresas de más de 200 trabajadores con estudios universitarios en 2016. capital extranjero

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.2. Delimitation and Classification

• · CARACTERIZACIÓN DE LAS MANUFACTURAS ESPAÑOLAS . There is a very sharp contrast between advanced and intermediate manufacturing and traditional manufacturing (see Table 1).

• · The first two (advanced and intermediate):

  • Greater demand drive (more dynamic market)
  • Higher labor productivity (they use less labor per unit of product)
  • Medium-sized or larger establishments/concentration of supply
  • Greater differentiation in types, qualities and characteristics of products
  • Higher level of external openness
  • More competitive international market
  • Greater presence of foreign capital
  • More international character
  • Greater innovative effort
  • They use more qualified labor 7emin ta zabal zazu

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.3. Evolution of the Industrial Sector

3.3.1. Comparison of the evolution of the industrial sector with respect to the economy as a whole

Table 2: Importance of manufacturing in the Spanish economy, 1985-2018 [%]

❑ 1985-2018: Reduction in industrial participation: in total GVA (in current and constant terms) and in total employment 1985 1995 2005 2010 2018 VAB manufacturas/VAB total (precios corrientes) ..... 22,5 17,6 15,7 13,3 14,0 VAB manufacturas/VAB total (precios constantes, base 2010). 16,4 15,8 15,5 13,3 13,7 Empleo manufacturas/Empleo total. 19,7 17,2 14,5 11,8 10,9 Exportaciones manufacturas/Exportaciones totales .. 54,3 60,6 58,6 57,1 58,2 Importaciones manufacturas/Importaciones totales .. 51,5 68,0 67,1 61,7 63,6 Exportaciones manufacturas/PIB. 11,6 13,3 14,5 14,6 20,0 Importaciones manufacturas/PIB 9,5 15,6 19,9 16,5 20,6 ......... Source: INE, CNE y Contabilidad Trimestral, base 2010, y MINCOTUR, DataComex 8emin ta zabal zazu

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.3. Evolution of the Industrial Sector

3.3.1. Comparison of the evolution of the industrial sector with respect to the economy as a whole

Chart 1: Weight of manufacturing in total GVA in the EU, 1985-2017 [% at current prices]

❑ Concern about the possible deindustrialisation of the Spanish economy, a trend shared by a large part of European economies (Italy, France, United Kingdom, Germany, EU-28) 30 Alemania 26 Italia 22 18 Francia 14 España 10 R. Unido 6 1 1985 1990 1995 2000 2005 2010 2015 2017 Source: Eurostat, National Accounts, Comisión Europea, AMECO y EU KLEMS Database 93.3. EVOLUTION OF THE INDUSTRIAL SECTOR

Universidad del País Vasco

Euskal Herriko Unibertsitatea

3.3.1. Comparison of the evolution of the industrial sector with respect to the economy as a whole

❑ The fear of the deindustrialization process loses intensity when we know its causes: - The contraction of the share of manufacturing in total GVA in constant terms is substantially lower than that of GVA at current prices and employment. This is due to the greater efficiency of industry (faster productivity growth and lower price increases) - The progressive outsourcing of services by industrial companies and their growing demands for them (especially those related to ICT) hides the fact that part of the services are intended to satisfy the requirements of industrial companies and that if they were not outsourced they would count as industrial activities The impact of economic globalization: - In the face of increasing competition from emerging economies, a growing proportion of the domestic demand for manufactured goods in advanced countries is being met by imports, which threatens the survival of less efficient production - Competition from emerging economies has encouraged the adoption in more advanced economies of business strategies of offshoring and international fragmentation of production processes (global production chains involving multiple companies and countries) - The internationalisation of industrial companies is also evident in the fact that both exports (in particular) and imports of manufactured goods have increased their weight in GDP, once the contraction in demand associated with the crisis has been overcome [see table 2] 10