Regional specialization and concentration of industrial activity in accession countries

Since 1990, Central and East European economies have experienced increasing integration with the European Union via trade and direct foreign investments. The spatial implications of this process have not been investigated in-depth so far. Have patterns of regional specialization changed over the period 1990-1999? Has a relocation of manufacturing activity taken place? What are the determinants of regional specialization and industrial concentration patterns? This paper identifies and explains the effects of economic integration on patterns of regional specialization and the geographic concentration of manufacturing in Bulgaria, Estonia, Hungary, Romania and Slovenia. Using a specially created data base, we find evidence of regional relocation of industries, leading to higher average regional specialization in Bulgaria and Romania and lower average regional specialization in Estonia. In Hungary and Slovenia the average regional specialization has not changed significantly. Our results indicate that both factor endowments and geographic proximity to European core determine the location of manufacturing in accession countries.