Sectoral specialisation in the EU a macroeconomic perspective

important, more capital-intensive industries. A gradual upgrading of skills can be deduced from
the increase of medium skill-intensive industries (plastics, paper, wood). CEECs also
strengthened their comparative advantage in the production of motor vehicles. Moreover, there
has been a strong rise in the output of the technology-driven electrical industry, which has more
than tripled since 1995.

References:

K. H. Midelfart-Knarvik, H. G. Overmann, S. J. Redding and A. J. Venables (2000), “The Location of European Industry”, Economic
Papers 142, prepared for the Directorate-General for Economic and Financial Affairs, European Commission.

H. Handler (2003), ed., “Structural Reforms in the Candidate Countries and the European Union”, Austrian Ministry for Economic Affairs
and Labour, Economic Policy Section, Vienna.

2.2 SECTORAL RE-ALLOCATION

Differences in specialisation patterns may be
reflecting the variation in the speed of structural
adjustment across EU countries or regions.
Indeed, structural adjustment has been a
continuous characteristic of the business cycles
over the last 15 years for the euro area (see
Chart 4). When accounting for employment
gains and losses during booms and recessions
in the two business cycle periods 1985-1993
and 1995-2000, the data indicate that there has
been a continuous increase in the relative
importance of the services sectors, while
manufacturing, agriculture and mining and
quarrying have lost weight in total employment.

This gives an indication as to the importance of
structural adjustments over the business cycle.
Finally, the comparison of the cycle 1987-1993
with 1993-2000²⁸ shows that sectoral re-
allocation has been a persistent feature of the
euro area for the last two decades, contrary to
the US experience where structural adjustment
was mainly a feature of the 1990s²⁹.

28 Cycles have been determined on a trough-by-trough basis; for
the period 1993-2000 the small sub-cycles 1993-1997 and 1997-
1999 have been subsumed under one cycle encompassing the
entire period (see also section 3.1 where the cyclical behaviour
of euro area GDP is discussed in more detail).

29 See E. L. Groshen and S. Potter (2003) “Has Structural Change
Contributed to a Jobless Recovery”, Federal Reserve Bank of
New York, Vol. 9, no 8 for a comparison with cyclical and
structural job adjustments in the United States for the business
cycles in the early 1980s and the late 1990s.

Chart 4 Euro area business cycles and structural adjustment

Distribution

— Hotels and
restaurants

⁴Agiiculture

Sources : Eurostat, NCBs, ECB calculations.

Note: The size of the circles refer to the average share of the sector in the euro area over the indicated period. Sector names have been added
only for selected sectors.

ECB

Occasional Paper No. 19

July 2004

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