THE INTEGRATION AND CONCENTRATION/SPECIALIZATION OF EUROPEAN COUNTRIES ACROSS MANUFACTURING INDUSTRIES

This paper empirically investigates whether the recent European integration process has significantly affected the concentration/specialization of European countries in fewer numbers of manufacturing industries, or vice versa. Pertaining to scarce empirical work on the issue, there are conflicting arguments but not common agreement about this matter yet. In this regard, we specify an empirical model describing the case benefiting from P. Krugman (1991) and other empirical studies. Employing a balanced panel data set that covers 22 European countries and 23 manufacturing industries for the period 1995-2008, we estimate in general two different regression models, a panel model and country by country estimates from the time series. Findings reveal that overall direct indicators of the integration have had significant impact on the dispersion of the industries in European countries, while some other factors have significantly induced the countries to concentrate/specialize in fewer numbers of industries. On the other hand, due purely to some of the measured integration and other indicators contained in the model, we observe a definite industrial concentration only in 3 countries and a definite industrial diversification only in 2 countries of Europe. The integration indicators and other determinants have affected the industrial distribution differently across the countries.