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European Integration and Regional Specialization

European Integration and Regional Specialization. Carlo Menon Ca’ Foscari Venice LSE . Background. EU (Krugman’s) paradox: is integration fostering more diversification? OCA and asymmetric shocks Models of endogenous growth and NEG Intra-industry trade

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European Integration and Regional Specialization

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  1. European Integration and Regional Specialization Carlo Menon Ca’ Foscari Venice LSE

  2. Background • EU (Krugman’s) paradox: is integration fostering more diversification? • OCA and asymmetric shocks • Models of endogenous growth and NEG • Intra-industry trade • Empirical issues: Krugman and Locational Gini indexes, geographical units, tradable/not tradable, service sector, data

  3. Distributive approach • First proposed by D. Quah (1993) as an alternative to the “β-convergence” test • Based on the representation of the stochastic kernel operator Mu*, which codify the relation between the probability functions associated to the distribution F at time T and t : • It can be represented by a Markov-Chain process or by a 3D graph. • Points of strength: focus on distributional dynamics and multimodality, possibility of applying conditional schemes (i.e. spatial dependency).

  4. Distributive approach to regional specialization • For a given industry, analysis of the evolution of the distribution at time t and T of the share of employment in each region, indexed for each period by the average value of all regions • Stochastic kernel: 3D plot of P(fT|ft) • Possibility of applying different conditional schemes (national values, spatial contiguity, trade volumes...)

  5. Example: Textile 1990-2001,EU-15, NUTS2

  6. Regional sectoral labour productivity • Distributive analysis of dynamics of GVA/L for sub-national units, inside each sector (surprisingly rare!) • Speculating that manufacturing and service sector have different spatial properties, the composition effect may hide relevant results • First (raw) outcomes: • divergence for manufacturing, persistence/divergence for service sector • After applying a “contiguity” conditioning scheme: clear convergence for manufacturing, persistence for service sector

  7. Next steps and research problems:specialisation • Locational dynamics of each manufacturing branch • Spatial properties of service sector • Work on data in order to overcome the NUTS2 classification (toward FUR or continuous space) • Regional Intra-industry trade • Accounting for functional urban specialization and demanufaturing • Links to other relevant issue of economic geography (cities hierarchy, convergence...)

  8. Next steps and research problems:sectoral convergence • Improve the empirical (distributional) approach to regional sectoral labour productivity convergence • Explore and explain the differences between service and manufacturing • Shadow effect (negative autocorrelation?) • Overcome the NUTS2 classification (toward FUR or continuous space)

  9. Thanks

  10. CONVERGENCE

  11. PERSISTENCE

  12. DIVERGENCE

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