Integration, Regional Specialization and Growth Differentials in EU Acceding Countries: Evidence from Hungary

provided by Research Papers in Economics

Integration, Regional Specialization and Growth Differentials
in EU Acceding Countries: Evidence from Hungary^*

Anna Iara / Iulia Traistaru^**,

Center for European Integration Studies, University of Bonn, Germany

Abstract

This paper investigates the impact of market integration on regional production
structures and regional growth differentials in Hungary over the period 1994-2000. Our
analysis indicates a relocation of manufacturing towards border regions, in particular
towards regions bordering the European Union. On average, regional manufacturing
specialization increased. We find a positive relationship between knowledge spillovers
proxyed with a measure of foreign direct investment intensity and regional growth as
well as between regional manufacturing specialization and regional growth. The change
in regional specialization is also positively related to regional growth. Our empirical
results show that on average, other things equal, high growth rates are associated with
high initial levels of GDP per capita. This finding shows up even when controlling for
regional economic structures, change in manufacturing specialization, the degree of
openness and geographical proximity to western markets. Our research suggests that in
the first stage of market integration divergence forces tend to prevail leading to relative
winners and losers across space.

Key words:          Economic integration, Location of economic activity, Regional

growth

JEL Classification:   F15, R11, R12

This research was undertaken with financial support from the European Commission’s 5^th Framework
Programme. We thank Ronald Moomaw, Gabriele Tondl, Christian Volpe Martincus and participants
at the Conference on “Cohesion Reform in a Larger Union”, held at the College of Europe, Brugge,
and the 2003 Annual INFER Conference for helpful comments and suggestions.

Corresponding author: E-mail: [email protected]

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