Growth, specialisation, and economic integration in Europe

This thesis contributes to the understanding of the economic effects of European integration, on both the pattern of industrial specialisation in European regions and openness and income for countries of the European Economic Community (EEC). Chapter 2 provides a descriptive analysis of the evolution of the patterns of specialisation across European regions during 1975-1995. We find that regions are more specialised than countries. Over time, countries and regions have increased specialisation, although at a slow pace. When analysing specialisation dynamics, mobility within the pattern of specialisation changes notably at the regional level. We also find significant cross-country and within-country differences in specialisation. Chapter 3 studies production patterns in 45 European regions since 1975. We estimate a structural equation derived directly from the Heckscher-Ohlin theory, which relates an industry's share of a region's GDP to factor endowments and relative prices. Factor endowments are found to play a significant and quantitatively important role. The explanation is most successful for aggregate industries, and works less well for disaggregated industries within the manufacturing sector. We find no evidence that increasing European integration has weakened or stengthened the relation between factor endowments and production patterns. Chapter 4 adds economic geography considerations into the analysis of patterns of specialisation in manufacturing industries across regions in seven European countries since 1985. We estimate an equation that relates an industry's share of GDP to factor endowments, industry characteristics, and economic geography variables. Both factor endowments and economic geography are found to be significant in explaining specialisation. Among economic geography variables, cost linkages are more important than demand linkages. There is no evidence that increasing integration has weakened or stengthened the relationship between factor endowments, economic geography, and production patterns within countries. Chapter 5 explores how European economic integration has affected openness and income. We test for permanent effects of EEC membership on openness, income, and income convergence at the time of accession. Results indicate EEC membership improves permanently openness within the EEC and income, but has neither an effect on income growth nor on convergence. Second, we investigate the differential effect of EEC membership by applying a differences in differences specification which controls for common time series shock. Openness, income, and convergence among the EEC countries were improved significantly. Chapter 1 presents an overview of the thesis with a summary of conclusions and contributions. Chapter 6 summarises the main findings of the thesis.