The impacts of European Union economic integration process on the regional concentration and specialization of manufacturing industries

There are various ideas and findings on the effects of European Union integration process on the location decisions of manufacturing industries across European Geography by increasing the mobility of products, factors of production, people, ideas, know-how and technology among the countries and regions. Several academic studies foresee the result that European Union integration will increase the regional concentration and specialization of manufacturing industries across Europe. In this sense, according to the models developed under the pioneer studies of Krugman (1991b), increasing international trade and factor mobility will cause manufacturing industries to concentrate particularly in the cores of Europe and keep other regions away from industrialization. However, the other studies at the opposite pole foresee the result that European Union integration will reduce the regional concentration and specialization of manufacturing industries across Europe. Considering these conflicting arguments, it is a matter of significance for Europe and Turkey whether the deepening of the integration and the expansion towards Central and East European countries in 2000s, which includes our country as well, will cause an increasing concentration of industries towards the cores or dispersion towards peripheries. Although there are a great number of theoretical studies in the field, empirical studies are quite inadequate and there is no consensus yet on how economic integrations affect concentration-dispersion process of industries. In our study, for analyzing the effect of European Union integration on distribution of manufacturing industries across Europe, we define a panel data model that exploits the annual data from 22 European countries and 23 sub-sectors of manufacturing industry (ISIC Rev-3) between 1995 and 2008. On the grounds of the theoretical and empirical studies by Krugman and certain others, we establish a relatively authentic econometric model with the variables that we assume to represent European Union integration process. According to the results of the study, the integration has an impact on the geographical distribution of the manufacturing industries and causes retarding impacts on the ongoing concentration and specialization processes. We also determine that a dispersion movement has been proceeding in the manufacturing industry from the center of Europe towards the East and South by the effect of the integration, starting especially around the years when Central and Eastern European countries joined the union.