Is manufacturing still the engine of growth?

Abstract

This paper focuses on an interesting and controversial debate on the factors underlying economic growth. Kaldor's belief that increasing returns to manufacturing production are the driver of growth is confronted with data from 11 representative countries spanning nearly two decades. Various alternative and complementary specifications are investigated using a panel estimation methodology. The results show that growth in manufacturing output is an important determinant of both productivity growth and gross domestic product growth, and that, despite its increasing size, the service sector does not appear to play a similar role.