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

Integration, Regional Specialization and Growth Differentials in EU Acceding Countries

bordering other accession countries experienced a decrease in manufacturing
specialization, while manufacturing specialization remained constant in regions
bordering the EU. Regional differentials in GDP per capita increased over the analyzed
period. Regions bordering the EU had the highest levels of GDP per capita compared to
the national average while regions bordering other accession countries and regions
bordering countries outside the EU enlargement had the lowest levels of GDP per capita
relative to the national average.

Our econometric analysis indicates a positive relationship between knowledge
spillovers proxyed with a measure for regional FDI 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. When testing for
regional convergence we find that on average, other things being 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, changing manufacturing
specialization, the degree of openness and geographical proximity to western markets.
Our results suggest that during an early stage of market integration divergence forces
tend to prevail leading to relative winners and losers across space.

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