Specialisation and Convergence in European Regions

The purpose of this paper was to analyze specialization and convergence of European countries and regions, within the framework of integration in the EU. This is important not only for long-term real convergence processes, but also for a proper functioning of the monetary union (in the line of research on the OCA's criteria, asymmetry of shocks and synchronization of business cycles). The position of new member states is particularly delicate, also considering the forthcoming adoption of the euro by some of them. As indicated by the EU Treaty, economic growth should be balanced with economic and social cohesion that includes a careful consideration of regional disparities. Our empirical investigation focuses on the regions of EU25, further broken up into other relevant groupings (EU15, EMU, and the new members' EU10 group), over the period from 1980 (or 1990 for EU10) to 2005. This paper considers a rather fine regional disaggregation (NUTS-2 level), counting 250 regions. The analysis of different indices of specialisation point to a prevalent increase of homogeneity of sector structures across European regions, although in some cases (especially in the industrial sector and in some services) specialisation has increased. For convergence, a sigma convergence's analysis confirms a reduction of disparities, both at a country and regional level. However, a trade-off between fast national growth and internal distribution has emerged in the early stages of development, as in the case of new members. Moreover, beta convergence has also been established - regarding per capita income, employment and productivity - for almost all territorial aggregates (excluding the new members since 1999). The addition of structural variables, following a beta-conditional approach, indicates a positive role for services and a negative impact of agriculture. Finally, some preliminary results have been obtained by the innovative inclusion of specialisation indices within convergence regressions.regional economies; European regions; growth and convergence; specialisation

Comparing European Regions

Guest Editors' introduction to the special issue on "European Regions"European regions

China and India: Openness, Trade and Effects on Economic Growth

The paper has two objectives. Firstly, we wish to evaluate whether a greater economic integration has effects, and of what type, on migration flows from Central and Eastern Europe (New Member States of the EU, NMS) towards the fifteen countries of the European Union (EU-15). Secondly, we wish to understand what effect the migration flows from the NMS have on the labour market of the receiving countries in the EU-15. The most suitable theoretical context that seems to summarise European labour market characteristics is that of the insider/outsider model by Layard, Nickell and Jackman (Layard et al., 1991). We have modified the above mentioned model by introducing two innovations. Firstly, we constructed three measures that act as a proxy for economic integration: the Intra Regional Trade Index (IRTI), Global Trade Index (GTI) and Financial Market Integration (FMI). Then we placed the three indicators into the insider/outsider model to arrive at a modified version of Layard, Nickell and Jackman (Layard et al., 1991). The second innovative contribution was the introduction of an equation modelling migration flows. The creation of this equation is inspired by the neo-classical approach to migration theory (Harris-Todaro, 1970). The theoretical model, based on rational expectations, has been solved to find the equilibrium solution and the impact multipliers. We then carried out an empirical analysis, which involved estimating a Structural Vector Autoregression Model (SVAR). The aim of this estimation was to evaluate, on the one hand, the effect that greater European integration (a positive shock to the integration indicators) has on migration flows, and, on the other, to measure the type of effect that migration flows could have on the labour market of the EU-15 countries, considered as a single entity. The results of our empirical evidence show that economic integration does generate significant effects on migration flows from the enlargement countries towards the EU-15 countries. It also emerges that migration flows do generate an effect on the European labour market.China and India, economic growth, trade opening, trade specialisation, trade and growth

Institutional change, regional features and aggregate performance in eight EU’s transition countries

The aim of this paper is to throw some light on the main differences/similarities and dynamics in institutional frameworks, regional/sectoral features and aggregate performances in the eight transition countries that became EU members in May 2004 (8-CEECs). In the second section, a partial review of the main theoretical and empirical literature on the "great transformation" (Kornai, 2006) is presented, with a particular attention to the researches focusing on the relationship between institutional change and economic/employment performance and to the studies considering some regional features of the transition processes. Some stylized facts for the eight CEECs are presented in the third section, by distinguishing (i) initial conditions, (ii) institutional changes and progress in transition and (iii) economic/employment performance (GDP growth, unemployment and employment rates, etc.). In the forth section, the empirical results on some regional (NUTS 3) features (convergence, concentration and specialisation) of the 8-CEECs are discussed. Finally, an attempt to econometrically investigate some determinants of regional income convergence and national GDP and employment dynamics is presented in the fifth section, by highlighting the role of institutional change and some regional features. The main policy implications, concerning both European and national economic policies, are presented in the conclusive section.Transition countries, institutional change, regional features, aggregate performance

Specialisation and Convergence in European Regions

The purpose of this paper was to analyze specialization and convergence of European countries and regions, within the framework of integration in the EU. This is important not only for long-term real convergence processes, but also for a proper functioning of the monetary union (in the line of research on the OCA's criteria, asymmetry of shocks and synchronization of business cycles). The position of new member states is particularly delicate, also considering the forthcoming adoption of the euro by some of them. As indicated by the EU Treaty, economic growth should be balanced with economic and social cohesion that includes a careful consideration of regional disparities. Our empirical investigation focuses on the regions of EU25, further broken up into other relevant groupings (EU15, EMU, and the new members' EU10 group), over the period from 1980 (or 1990 for EU10) to 2005. This paper considers a rather fine regional disaggregation (NUTS-2 level), counting 250 regions. The analysis of different indices of specialisation point to a prevalent increase of homogeneity of sector structures across European regions, although in some cases (especially in the industrial sector and in some services) specialisation has increased. For convergence, a sigma convergence's analysis confirms a reduction of disparities, both at a country and regional level. However, a trade-off between fast national growth and internal distribution has emerged in the early stages of development, as in the case of new members. Moreover, beta convergence has also been established - regarding per capita income, employment and productivity - for almost all territorial aggregates (excluding the new members since 1999). The addition of structural variables, following a beta-conditional approach, indicates a positive role for services and a negative impact of agriculture. Finally, some preliminary results have been obtained by the innovative inclusion of specialisation indices within convergence regressions

Regional Unemployment in the EU before and after the Global Crisis

In this paper, we have empirically assessed the evolution of European regions in terms of both employment and unemployment during the recent financial crisis and Global Recession. Our specific research questions were as follows: (i) has there been a reversal in employment and unemployment dynamics at a regional level, during the crisis (2007–10) compared to the previous period (2004–07)? (ii) have the western regions in ‘old’ EU states behaved differently in response to the crisis compared with the eastern regions of the NMS? Finally, (iii) are the differences between the two groups of regions related to structural or institutional variables? After a review of the literature on the key determinants of regional unemployment, we have summarized our main findings concerning the Global Crisis’ impact on the labour market. Our econometric investigation aimed to answer the questions we have posed. Structural characteristics have been considered in terms of sector specialization of regional economies. In addition, we have considered certain institutional characteristics, by including indicators of the share of temporary workers and of long-term unemployed. Our analysis has then been targeted at the sub-samples of western- and eastern-European regions: we show that the critical factors for labour market performance during the crisis in these two groups differs greatly. From a methodological viewpoint, we have exploited a spatial filtering technique which allowed us to greatly reduce any unobserved variable bias – a significant problem in cross-sectional models – by accounting for latent unobserved spatial patterns.crisis, employment, unemployment, European Union, NUTS-2, spatial filtering, sectoral composition, spatially heterogeneous parameters

The Impact of Financial Crises on Youth Unemployment Rate

The impact of last financial crisis (2007-08) and subsequent global recession (2008-09) has been deeper on the weakest segments of the labour market. In this paper, we mainly focus on the extent and persistence of the impact of (past and last) financial crises on youth (15-24) unemployment rate. After a review of the existing (theoretical and empirical) literature on the determinants of youth unemployment rate in general and at the occurrence of economic crises, we present empirical estimations on the impact of past financial crises on young workers. We empirically investigate the relationship between financial crises and youth unemployment rate by employing fixed effects panel estimation on a large panel of countries (about 70) around the world for the period 1980-2005. Gender specific effect of crises on young workers is also investigated. To analyse the severity of financial crises for economies at different levels of economic development, we re-estimate our model for sub-samples of high income OECD countries and other economies in the sample. For further robustness check and sensitivity analysis, alternative definitions of crises are considered. The "persistence" of the impact of financial crises for young workers is also investigated. Finally we also estimate the Arellano-Bond dynamic panel, confirming the significance of the results. Young people are far more affected by the employment crises than the elder; long term unemployment for young workers can be harmful and may result in “discouraged workers” effects and social exclusion from labour market. Notwithstanding some peculiarities of the last crisis, our econometric investigations can be useful to better assess its impact on youth unemployment. At the end of the paper, before presenting some final considerations and policy implications, very recent data on youth labour market dynamics are analysed and discussed.crises, labour impact of economic crises, youth unemployment, panel fixed effects.

Institutional Change, Regional Features and Economic Performance in EU’s Transition Countries

The aim of this paper is to contribute to throw some light on the main differences/similarities and dynamics in institutional frameworks, regional/sectoral features and economic performance in the eight transition countries that became EU members in May 2004 (8- CEECs). In the second section, a partial review of the main theoretical and empirical literature on the "great transformation" (Kornai, 2006) is presented, with a particular attention to the researches focusing on the relationship between institutional change and economic performance and to the studies considering some regional features of the transition processes. Some stylized facts for the eight CEECs are presented in the third section, by distinguishing (i) initial conditions, (ii) institutional changes and progress in transition and (iii) economic performance (GDP growth, unemployment and employment rates, etc.). In the forth section, the empirical results on some regional (NUTS 3) features (convergence, concentration and specialisation) of the 8-CEECs are discussed. Finally, an attempt to econometrically investigate some determinants of regional income convergence and national GDP and employment dynamics is presented in the fifth section, by highlighting the role of institutional change and some regional features. The main policy implications, concerning both European and national economic policies, are presented in the conclusive section