Regional growth in Hungary - The impact of European economic integration
At the enlargement of the European Union, the integration of the Central European applicant countries to the European economic area had already been widely implemented. In particular, trade reorientation to the West and foreign direct investment (FDI) had generated intensive economic linkages between old and new EU members. Transformation and economic integration have further resulted in changing patterns of regional specialization. At the same time, the Central European applicant countries experienced considerable regional disparities in economic growth. In Hungary too, sizeable regional disparities opened up in the 1990s. Motivated by recent economic theories this paper looks at the impact of some factors of European economic integration, in particular of FDI density, orientation to foreign markets, and manufacturing specialisation, on regional growth in Hungary at the NUTS III level. With panel data covering the years 1994-2001, I perform growth regressions with OLS, after finding regional fixed effects insignificant. I check for the robustness of the results to the omission of the capital region and to the correction for contemporaneous correlation across regions. I find that the share of agricultural employment and the change in export orientation of the regions are the paramount determinants of regional growth. A region having twice as high a share in agricultural employment than another produces a growth rate that is 15-20% lower. Besides, faster growing regions also have extensive export activity. Doubling the share of export in manufacturing output enhances the growth rate by around 7%. Investment per capita, the change in the employment rate, FDI density and the change in regional specialisation are found to enhance regional growth in some but not all specifications. Since higher growth of the back-lagging regions in Hungary can be expected from onward structural change with labour moving out of the agrarian sector, policies designed to address development issues in rural areas should therefore be an important aspect of regional policy. Promoting the orientation of the Hungarian economic actors towards foreign markets is also likely to be beneficial for the boost of regional growth.
|Date of creation:||Aug 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.ersa.org
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tondl, Gabriele & Vuksic, Goran, 2003. "What makes regions in Eastern Europe catching up? The role of foreign investment, human resources and geography," ZEI Working Papers B 12-2003, ZEI - Center for European Integration Studies, University of Bonn.
- Blomström, Magnus & Kokko, Ari, 2003.
"The Economics of Foreign Direct Investment Incentives,"
CEPR Discussion Papers
3775, C.E.P.R. Discussion Papers.
- Magnus Blomstrom & Ari Kokko, 2003. "The Economics of Foreign Direct Investment Incentives," NBER Working Papers 9489, National Bureau of Economic Research, Inc.
- Blomström, Magnus & Kokko, Ari, 2003. "The Economics of Foreign Direct Investment Incentives," EIJS Working Paper Series 168, The European Institute of Japanese Studies.
- Nauro F. Campos & Yuko Kinoshita, 2002.
"Foreign Direct Investment as Technology Transferred: Some Panel Evidence from the Transition Economies,"
William Davidson Institute Working Papers Series
438, William Davidson Institute at the University of Michigan.
- Campos, Nauro F & Kinoshita, Yuko, 2002. "Foreign Direct Investment as Technology Transferred: Some Panel Evidence from the Transition Economies," Manchester School, University of Manchester, vol. 70(3), pages 398-419, June.
- Campos, Nauro F & Kinoshita, Yuko, 2002. "Foreign Direct Investment as Technology Transferred: Some Panel Evidence from the Transition Economies," CEPR Discussion Papers 3417, C.E.P.R. Discussion Papers.
- Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001.
"GMM Estimation of Empirical Growth Models,"
2001-W21, Economics Group, Nuffield College, University of Oxford.
- T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
- Peter Nijkamp & Jacques Poot, 1998. "original: Spatial perspectives on new theories of economic growth," The Annals of Regional Science, Springer, vol. 32(1), pages 7-37.
- Paul Romer, 1989.
"Endogenous Technological Change,"
NBER Working Papers
3210, National Bureau of Economic Research, Inc.
- Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
- Joze P. Damijan & Mark Knell & Boris Majcen & Matija Rojec, 2003. "Technology Transfer through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers?," William Davidson Institute Working Papers Series 549, William Davidson Institute at the University of Michigan.
- Brock,W.A. & Durlauf,S.N., 2000.
"Growth economics and reality,"
24, Wisconsin Madison - Social Systems.
- Audretsch, David B. & Feldman, Maryann P., 2004. "Knowledge spillovers and the geography of innovation," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 61, pages 2713-2739 Elsevier.
- Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June.
- Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
- Anna Iara & Iulia Traistaru, 2004. "Integration, Regional Specialization and Growth Differentials in EU Acceding Countries: Evidence from Hungary," ERSA conference papers ersa04p298, European Regional Science Association.
- Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
- K. Schoors & B. Van Der Tol, 2002. "Foreign direct investment spillovers within and between sectors: Evidence from Hungarian data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/157, Ghent University, Faculty of Economics and Business Administration.
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa05p342. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If references are entirely missing, you can add them using this form.