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 Empirical issues: Krugman and Locational Gini indexes, geographical units, tradable/not tradable, service sector, data

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 M u *, 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).

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(f T |f t ) Possibility of applying different conditional schemes (national values, spatial contiguity, trade volumes...)

Example: Textile ,EU-15, NUTS2

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

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...)

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)

Thanks

CONVERGENCE

PERSISTENCE

DIVERGENCE