What drives the Spanish deindustrialization? A subsystem approach

This paper investigates the drivers of Spanish deindustrialization between 1995 and 2018 within a context of increasing international productive fragmentation. Building on the subsystem approach, we extend the analysis to a global Multi-Regional Input-Output (MRIO) framework in order to capture both domestic and international inputs embodied in manufacturing production. We combine this perspective with a structural decomposition analysis (SDA) to disentangle the relative contribution of internal factors (productivity, income, and investment) and external factors (outsourcing and international trade) with particular emphasis on Spain’s integration into global value chains (GVCs) and the European Union. Findings show that the period before the Great Financial Crisis saw marked deindustrialization, while the post-2010 phase showed a relative reversal, mainly due to outsourcing and export dynamics. While internal factors were largely responsible for these trends, external drivers (especially substitution of domestic inputs by imports and the reconfiguration of regional production) also played an increasing role. Heterogeneity among sectors also proved significant, with traditional and GVC-integrated sectors found to have been differently affected. By integrating internal and external drivers within a unified global subsystem framework, the paper contributes to current debates on industrial policy and productive autonomy in advanced economies exposed to GVC dynamics.