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



Integration, Regional Specialization and Growth Differentials in EU Acceding Countries

standard deviation and the coefficient of variation. The minimum share of exports in
regional industrial output increased from 13 percent to 26 percent while the maximum
increased from 53 percent to 83 percent. Regions bordering EU had the highest
openness over the analyzed period, where exports amounted to 83 percent in 2000. The
share of exports in manufacturing output was around 45 percent in the other three
groups of regions.

Additional evidence of market integration comes from data on FDI, in particular
EU FDI outflows. In Hungary, FDI inflows originating from the EU increased from 839
million ECU in 1994 (1146 million USD total inflows) to 1537 million EURO in 1998
(2036 million USD total inflows) (
Resmini / Traistaru (2003)). As shown in Table
A1.3, the average regional FDI intensity proxyed with the number of firms with foreign
capital per 1000 inhabitants at NUTS3 regional level increased over the period from
1.18 to 1.83 and so did regional differentials. Table A1.4 indicate that regions bordering
the EU (Austria) had the highest FDI intensity and regions bordering other accession
countries (Romania, Slovakia, Slovenia), the lowest.

4.2 Regional structural change and manufacturing specialization

Table A1.5 shows a clear pattern of relocation of manufacturing to border regions, in
particular to regions bordering the European Union. Regions bordering the EU (BEU)
have increased their employment shares in particular in capital - intensive industries (by
5.5 percent in the case of fuel, chemicals, rubber, plastics; by 2.6 percent in the case of
metallurgy, machinery, equipment, motor vehicles), resource-intensive industries (by
4.3 percent in the case of furniture and other manufacturing, by 3.3 percent in the case
of wood and paper products) and labour - intensive industries (by 2.4 percent in the case
of textiles, clothing, leather). Regions bordering accession countries have gained
employment in resource-intensive industries (by 4 percent in the case of wood and
paper products) while regions bordering countries outside the EU enlargement have
increased their shares in capital - intensive industries (by 6 percent in the case of
metallurgy, machinery, equipment, motor vehicles ) and resource-intensive products (by
4 percent in the case of non-metallic mineral products).

Tables A1.6-A1.8 show summary statistics of regional manufacturing
specialization in Hungary over the period 1994-2000. The average manufacturing
specialization of regions measured with the Herfindahl index increased by 6.5 percent



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