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Industrial specialisation and geographic concentration: Two sides of the same coin? Not for the European Union

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Abstract

Some recent studies have shown that specialisation of countries has tended to increase, while regional concentration of countries has tended to decrease. This seems to be counterintuitive at first glance. In this paper, we use the entropy index - as the indicator of structural change with the neatest aggregation properties to show how this divergence can happen. The main purpose of the paper is methodological, but we also apply the methodology to a specific case study: Manufacturing in the European Union since 1985. We confirm for this interesting period that increasing industrial specialisation has been offset by faster growth in the smaller Member States, with the net effect that industries have become somewhat less geographically concentrated. In terms of economic geography the evidence is in line with the second part of the inverted U-curve (where decreasing transport costs eventually foster de-concentration). This is no contradiction to increasing specialisation of countries in specific industries as predicted by many models in the old as well as the new trade theory.

Suggested Citation

  • Karl Aiginger & Stephen W. Davies, 2004. "Industrial specialisation and geographic concentration: Two sides of the same coin? Not for the European Union," Journal of Applied Economics, Universidad del CEMA, vol. 7, pages 231-248, November.
  • Handle: RePEc:cem:jaecon:v:7:y:2004:n:2:p:231-248
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    References listed on IDEAS

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    1. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
    2. Yvonne Wolfmayr-Schnitzer, 2000. "Economic Integration, Specialisation and the Location of Industries. A Survey of the Theoretical Literature," Austrian Economic Quarterly, WIFO, pages 73-80.
    3. Mary Amiti, 1999. "Specialization patterns in Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 573-593.
    4. Marius Brülhart, 1995. "Industrial Specialisation In The European Union: A Test Of The "New Trade Theory"," Economics Technical Papers 955, Trinity College Dublin, Department of Economics.
    5. Encaoua, David & Jacquemin, Alexis, 1980. "Degree of Monopoly, Indices of Concentration and Threat of Entry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 87-105, February.
    6. Karl Aiginger & Michael Pfaffermayr, 2004. "The Single Market and Geographic Concentration in Europe," Review of International Economics, Wiley Blackwell, vol. 12(1), pages 1-11, February.
    7. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, January.
    8. Karl Aiginger & Wolfgang Leitner, 2002. "Regional concentration in the United States and Europe: Who follows whom?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(4), pages 652-679, December.
    9. K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers 2008 - 2015 142, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    More about this item

    Keywords

    structural change; geographical concentration; industrial specialisation; European integration; entropy;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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