Industrial localization and countries’ specialization in the European Union”, mimeo, Working paper

The aim of this study is to empirically investigate the development of Industrial Localization and Countries ’ Specialization Patterns in the European Union, to explain the driving forces behind and to find out dynamic tendencies. We extend existing research work by using a broader data set, covering a longer period of time and by applying several econometric methods in order to explain Localization and Specialization. Explanatory variables are derived from Traditional Trade Theory, New Trade Theories and the New Economic Geography. Taking EU-KLEMS data for 14 European countries covering 20 industries over the period from 1970 to 2005 we compute both regional and locational Gini coefficients. There is a clear increase in Industrial Concentration but only a slight increase in Countries ’ Specialization in the EU evident over time. Especially, low technology or labor intensive industries experienced the highest increase in Industrial Concentration. New Trade Theory and New Economic Geography can explain both Industrial Concentration and Countries ’ Specialization in the EU best. As regards Countries ’ Specializatio