Total, direct and indirect employment effects of a hypothetical manufacturing ‘shutdown’: evidence from the main EU economies

There is a long tradition in economics that argues that the industrial sector has always been the engine of economic growth. However, in recent years, deindustrialisation has affected the European countries, albeit with differences, and the most negative effects of this process have occurred on the employment side rather than on value added. While the loss of employees in the productive sector raises concerns about its social and political implications, part of this process could be explained by the strong integration of manufacturing with other economic sectors – e.g., services. Indeed, its total employment absorptive capacity, generated through intersectoral linkages, is much greater than its direct employment. In this sense, using a revisited hypothetical extraction method, the main goal of the paper is to estimate the total employment impact of a hypothetical manufacturing ‘shutdown’, distinguishing its direct and indirect components by analysing the main European economies for the period 2000–2014.