Specialisation and concentration of CEEC manufacturing industries
2 SECTORAL
SPECIALISATION:
CURRENT SITUATION
AND EVOLUTION
---- 1995
..... 2001
Concentration
Specialisation
Sources : wiiw Industrial Database ; OeNB and wiiw calculations.
Note : In both cases a Krugman index is calculated (Midelfart-Knarvik et al., 2000) using real output data for eight acceding eastern European
countries and 13 manufacturing industries defined at the NACE, rev. 1, 2-digit level (letter code). For reasons of data availability, the
presentation of Chart 1 differs from the tables and figures in the main text.
1990s, notably Hungary, Latvia, Lithuania, and Poland (see left panel of Chart 1). The reasons
for this differ across countries: Hungary has undergone substantial restructuring, which is
strongly connected to the vast inflows of FDI into the country; in contrast, the increase in
Poland is explained by its low initial degree of specialisation (by 2001, the degree of
specialisation in Poland had reached the average CEEC-8 level, with a strong impact on the
latter); meanwhile, the Baltic states increasingly specialised in the wood and plastic industries.
The concentration indices (see Chart above, right panel) reveal an increase in the regional
concentration of manufacturing output in eastern Europe. In particular, the manufacturing of
electrical and optical equipment, a typical technology and skill-intensive industry, has become
strongly concentrated in Hungary. Its share of total CEEC-8 manufacturing output in this
industry doubled from 23% in 1995 to 46% in 2001, while the share of this industry in total
Hungarian manufacturing output increased from 8% to 31%. Thus, the manufacturing of
electrical and optical equipment shows the highest degree of regional concentration in eastern
Europe. The second-most concentrated industry is the wood industry, which has increasingly
moved to the Baltic states and is still strongly concentrated in Poland. The transport industry
has also become more concentrated, with production moving increasingly to Hungary and
Slovakia. Only two industries have spread across the region: the metal industry, which was the
most concentrated industry in 1995, ranked ninth in 2001, while the chemical industry, ranking
sixth in 1995, was the least concentrated industry in 2001. This tallies with the lowest output
growth rates for these industries in eastern Europe, apart from the absolute decline in the
production of textiles.
Thus, a substantial amount of restructuring took place in the acceding countries, leading to
greater similarities between them and the existing Member States. Convergence results from the
relative decline of initially important, labour-intensive and low value added activities like the
processing of food, textiles, metals and coke and the simultaneous expansion of initially less
ECB
Occasional Paper No. 19
July 2004