Statistical illusion and deindustrialization in Brazil between 2000 and 2020: a vertically integrated sector perspective

ABSTRACT:

This study aims to analyze the effect of the “statistical illusion” on the process of deindustrialization in the Brazilian economy between 2000 and 2020, investigating to what extent the declining share of manufacturing is linked to the outsourcing of services previously classified as industrial production and employment. For this purpose, the study examines how outsourcing has affected the industry’s share of employment and value added by applying the Vertically Integrated Sectors approach based on Input-Output Tables. Our methodological contribution is the incorporation of productive integration across sectors into the analysis of Brazilian deindustrialization. Most studies on the topic provides no empirical assessment of the statistical illusion and tend to focus on measures of the relative and horizontal importance of the productive system. Our analysis also considers industry classifications based on technological intensity and knowledge-intensive business services (KIBS). The findings indicate that the deindustrialization process in the Brazilian economy is not the result of a statistical illusion, which is consistent with empirical studies conducted in developed economies. However, the Brazilian case is marked by a more regressive pattern of deindustrialization, with a greater impact on industrial segments with higher technological intensity.

KEYWORDS:
Outsourcing; Deindustrialization; Structural Change; Vertically Integrated Sectors