European growth models and deindustrialization trajectories: the cases of Germany and Spain

Abstract This article investigates the deindustrialization process in Germany and Spain from 1995 to 2018. It is argued that the deindustrialization trajectories of each country are partially related to their growth models. A two-step analysis is conducted. First, using the Organisation for Economic Co-operation and Development (OECD) input–output tables, a hierarchical structural decomposition analysis is applied, decomposing the manufacturing value-added share into five deindustrialization drivers: relative prices, income, investment, outsourcing, and international trade. Second, building on the growth model perspective, an interpretative framework to analyze the evolution of these drivers is presented. The interaction between institutions, aggregate demand, and the economic structure is explicitly considered in this framework. The comparison of the German and Spanish cases and the distinction between the pre and postcrisis periods illustrate the consequences of the distinct growth models (and the economic policies on which they are grounded) in structural change. The results suggest that deindustrialization trajectories in both countries are well-explained by their specific labor, financial, fiscal, and industrial policies.