Integration, Regional Specialization and Growth Differentials in EU Acceding Countries: Evidence from Hungary

This paper investigates the impact of market integration on regional production structures and regional growth differentials in Hungary over the period 1994-2000. Our analysis indicates a relocation of manufacturing towards border regions, in particular towards regions bordering the European Union. On average, regional manufacturing specialization increased. We find a positive relationship between knowledge spillovers proxyed with a measure of foreign direct investment intensity and regional growth as well as between regional manufacturing specialization and regional growth. The change in regional specialization is also positively related to regional growth. Our empirical results show that on average, other things equal, high growth rates are associated with high initial levels of GDP per capita. This finding shows up even when controlling for regional economic structures, change in manufacturing specialization, the degree of openness and geographical proximity to western markets. Our research suggests that in the first stage of market integration divergence forces tend to prevail leading to relative winners and losers across space. Key words: Economic integration, Location of economic activity, Regional growth JEL Classification: F15, R11, R12

Skill Diffusion by Temporary Migration? Returns to Western European Working Experience in the EU Accession Countries

Temporary migration is of growing significance in Europe. Upon migration to a country with higher technological development that typically coincides with positive wage differentials, temporary migrants may upgrade their skills by learning on the job and subsequently import the newly acquired human capital to their source country, thus adding to international know-how diffusion and the catching up of the respective economy. This paper is the first to provide supportive evidence of this hypothesis in a cross-country East to West European perspective, using the 2003 Youth Eurobarometer dataset.Central and Eastern Europe, return migration, wage premium, skill diffusion

Decomposition of Perverse Sheaves on Plane Line Arrangements

On the complement $X= {\mathbb C}^2 - \bigcup_{i=1}^n L_i$ to a central plane line arrangement $\bigcup_{i=1}^n L_i \subset {\mathbb C}^2$, a locally constant sheaf of complex vector spaces $\mathcal L_a$ is associated to any multi-index $a \in {\mathbb C}^n$. Using the description of MacPherson and Vilonen of the category of perverse sheaves (\cite{MV2} and \cite {MV3}) we obtain a criterion for the irreducibility and number of decomposition factors of the direct image $Rj_* \mathcal L_a$ as a perverse sheaf, where $j: X \rightarrow {\mathbb C}^2$ is the canonical inclusion

Scaling Correlations Among Central Massive Objects and Their Host Galaxies

The central regions of galaxies show the presence of super massive black holes and/or very dense stellar clusters. Both such objects seem to follow similar host-galaxy correlations, suggesting that they are members of the same family of Compact Massive Objects. Here we investigate a huge data collection of Compact Massive Objects properties to correlate them with absolute magnitude, velocity dispersion and mass of their host galaxies. We draw also some preliminary astrophysical conclusions

Skill diffusion by temporary migration? Returns to Western European working experience in the EU-accession countries

Temporary migration is of growing significance in Europe. Upon migration to a country with higher technological development that typically coincides with positive wage differentials, temporary migrants may upgrade their skills by learning on the job and subsequently import the newly acquired human capital to their source country, thus adding to international know-how diffusion and the catching up of the respective economy. This paper is the first to provide supportive evidence of this hypothesis in a cross-country East to West European perspective, using the 2003 Youth Eurobarometer dataset.Central and Eastern Europe, return migration, wage premium, skill diffusion

Regional growth in Hungary - The impact of European economic integration

At the enlargement of the European Union, the integration of the Central European applicant countries to the European economic area had already been widely implemented. In particular, trade reorientation to the West and foreign direct investment (FDI) had generated intensive economic linkages between old and new EU members. Transformation and economic integration have further resulted in changing patterns of regional specialization. At the same time, the Central European applicant countries experienced considerable regional disparities in economic growth. In Hungary too, sizeable regional disparities opened up in the 1990s. Motivated by recent economic theories this paper looks at the impact of some factors of European economic integration, in particular of FDI density, orientation to foreign markets, and manufacturing specialisation, on regional growth in Hungary at the NUTS III level. With panel data covering the years 1994-2001, I perform growth regressions with OLS, after finding regional fixed effects insignificant. I check for the robustness of the results to the omission of the capital region and to the correction for contemporaneous correlation across regions. I find that the share of agricultural employment and the change in export orientation of the regions are the paramount determinants of regional growth. A region having twice as high a share in agricultural employment than another produces a growth rate that is 15-20% lower. Besides, faster growing regions also have extensive export activity. Doubling the share of export in manufacturing output enhances the growth rate by around 7%. Investment per capita, the change in the employment rate, FDI density and the change in regional specialisation are found to enhance regional growth in some but not all specifications. Since higher growth of the back-lagging regions in Hungary can be expected from onward structural change with labour moving out of the agrarian sector, policies designed to address development issues in rural areas should therefore be an important aspect of regional policy. Promoting the orientation of the Hungarian economic actors towards foreign markets is also likely to be beneficial for the boost of regional growth.

Rules and risk in the euro area: does rules-based national fiscal governance contain sovereign bond spreads?

The strengthening of national fiscal frameworks, including numerical fiscal rules, has recently been proposed as an important part of the economic governance reform package for the EU. The strength of numerical fiscal rules can be described along the dimensions of their statutory base, the room to revise budgetary objectives, provisions for their monitoring and enforcement, and their media visibility. With a unique data set summarizing the quality of national fiscal rules along these dimensions, we show that stronger fiscal rules in euro area member states reduce sovereign risk. According to our estimates, yield spreads against Germany of countries with relatively weak fiscal rules could be up to 100 basis points lower if they upgraded their numerical fiscal rules. The legal base turns out to be the most important dimension for the perceived effectiveness of the rules. The effectiveness of the correction and enforcement mechanisms turns out to be very important as well, while the role of the bodies in charge of monitoring and enforcing compliance is somewhat smaller. Overall, national fiscal rules are found to be beneficial for market assessments of governments' ability and willingness to timely service debt: they could thus provide an effective way to implement fiscal discipline.

Regional structural change and growth in Romania

This paper identifies and explains the impact of increasing economic integration with the European Union on regional structural change and growth in Romania. Using data on imports and exports we first investigate the trade performance patterns between Romania and the European Union in the period 1990-2000. Second, using regional data for the period 1991-1999, we analyse the changes in regional specialisation patterns. Third, we discuss changes in the patterns of location and concentration of industrial activities. Forth, we investigate the relationship between regional specialisation and growth. Next, we look at the role of trade liberalisation in determing regional wage differentials. Finally, based on the results found in the previous sections, this paper predicts the types of likely winning and losing regions in Romania in its economic integration with the European Union.

How flexible are wages in EU accession countries?

The transition to a market economy and increased economic integration have fostered regional disparities in Central and Eastern European countries. This paper investigates whether and to what extent wages could act as an equilibrating mechanism in these countries by adjusting to local market conditions. Using regional data for the 1990s, we estimate static and dynamic wage curve models for Bulgaria, Hungary, Poland and Romania. We find empirical evidence for a wage curve in Bulgaria, Hungary and Poland suggesting that wages could help equilibrate labour markets following labour demand shocks. In the case of Romania, the unemployment elasticity of pay is not significantly different from zero. --wage flexibility,panel data,EU accession countries

Revenue for EMU: A Contribution to the Debate on Fiscal Union

In the wake of the euro area crisis, the debate on instruments to deepen economic integration among its members has intensified, among others putting forward a fiscal stabilization capacity for EMU members. Contributions made so far to further this idea have mostly concentrated on the expenditure side and possible stabilisation properties. This analysis reviews the most important proposals and discusses design choices and institutional conditions to develop the revenue side of such a fiscal instrument