Stagnating Industrial Employment in Latin America

Abstract

The industrialization of developing countries has fundamentally transformed work, employment, and labor for millions. Despite the industrialization of most of the developing world, we present evidence that Latin America has experienced stagnating industrial employment in the past few decades. Benefiting from recently available data on industrial employment as a percentage of total employment from 1980 through 2006, we analyze fixed-effects models for 20 Latin American countries. Specifically, we examine three theoretical explanations: productivity/comparative advantage, institutionalism, and dependency/world-systems. Our analyses demonstrate that the prevailing productivity/comparative advantage explanation has limited value. By contrast, we find supportive evidence for a combination of institutional and dependency/world-systems variables. In particular, the stagnating industrial employment share in Latin American countries has been driven by the negative effects of (in order of magnitude) the Mercosur trade agreement, mineral and ore exports (as a percentage of total exports), the duration of the current political regime, military spending (as a percentage of GDP), and inward foreign direct investment flows (as a percentage of GDP).