Deindustrialization in Colombia: Quantitative Analysis of Determinants

This document looks at the deindustrialization process in Colombia during 1965-2012, attempting to distinguish between secular movements (normal) from factors that have accelerated its process as a result of the Dutch Disease. This is a case of accelerated deindustrialization, where the Industry Value Added/GDP ratio has fallen from almost 25% during the mid-seventies to 20-22% in the eighties and now reaches a mere 12%. This deindustrialization has been linked to: i) structural difficulties in the provision of basic services (energy, telecommunications, roads), and ii) the effect springing from the energy-mining boom, accompanied by a costly labor force and a rampant appreciation of the exchange rate, thus giving support to the DD hypothesis. On the econometric front, the VEC model supports the DD hypothesis for the period 1970-2010, as compared to the alternate hypothesis of secular deindustrialization. This is usually explained by the expansion of the services sector (due to relative gains in productivity and modernization ) and the level of development (gains in GDP per capita), which are typically linked to the developed world.

Autorentext

Sergio Clavijo Vergara, is the Executive Director of (think-tank) ANIF since march 2005. Previously he served as co-director on the Board of Directors of the Central Bank of Colombia (1999 2005) and as Deputy-Minister of Finance (1998 1999). He also worked in the International Monetary Fund, Western Hemisphere Department (1991 1993).