Anna Iara / Iulia Traistaru
due to trade liberalization, we believe that a number of trends related to the spatial
impact of the economic openness after the entering into force of the Europe Agreement
in 1994 could be captured. This period has also the advantage of avoiding the volatility
of the initial transition years.
The data show that in Hungary regions bordering the EU had the highest
manufacturing specialization levels and regions bordering other accession countries the
lowest. Regional average manufacturing specialization increased over the period 1994-
2000 by 6.5 percent. Interior regions and regions bordering countries outside the EU
enlargement had the highest increase in regional specialization. The level of
manufacturing specialization remained constant in regions bordering the EU and
decreased in regions bordering other accession countries. Regional differentials in GDP
per capita increased over the 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. Our econometric analysis indicates a positive relationship between
knowledge spillovers and regional growth as well as between regional manufacturing
specialization and regional growth. The convergence tests suggest a tendency for
absolute and conditional divergence of the real regional GDP per capita.
The remainder of this paper is organized as follows. Section 2 discusses the
theoretical framework and testable hypotheses derived from it. We discuss then in
section 3 our data and measurement issues. Section 4 analyses summary statistics
related to regional specialization and regional GDP per capita in NUTS 3 regions in
Hungary over the period 1994-2000. Section 5 discusses estimation issues and the
results of our empirical analysis. Finally, section 6 concludes.
2 Theoretical framework
The effect of openness to trade and foreign direct investment on economic growth and
patterns of inequalities among participating countries and regions is still a matter of
controversy among economists3. Until the end of 1980s, the debate on the linkage
between openness and growth was dominated by neo-classical trade and growth
theories, based on perfect competition and constant returns to scale, predicting that
For surveys of this literature and detailed discussions of reasons for disagreements see Rodriguez and
Rodrik (2001) and Baldwin (2003).