Annals of “Dunarea de Jos” University of Galati Fascicle I. Economics and Applied Informatics
Years XXI – no2/2015
ISSN-L 1584-0409 ISSN-Online 2344-441X www.eia.feaa.ugal.ro
Regional European Specialization and Concentration in
Central and Eastern Europe
Valentin NECULITA, Mihaela NECULITA
A R T I C L E I N F O A B S T R A C T
Article history: Accepted September Available online September JEL Classification F , F , P
Keywords:
Specialization, )ntegration, European funds, Absorption
Enlargement has become a fundamental priority of the European Union after the ’s. Up to now seven rounds have been held for enlarging the Community which initially was made up of six Member States Belgium, Germany, France, )taly, Luxembourg, Netherlands . Among all EU enlargements, the eastward enlargement from was the biggest challenge, both due to the number of new Member States which joined - the number of EU inhabitants increasing to approximately from to million, but also due to the difference of Gross Domestic Product between the old and new EU members. This paper aims to provide insights in European integration and absorption of European funds into the newest that joined the European Union. The paper proposes an analysis of integration and specialization in Eastern Europe by means of data and statistics provided by European and national statistics institutions.
© EA). All rights reserved.
1. Introduction
The study of regional specialization and concentration is based on economic activities, place and role of these economic activities both regionally and nationally. )n the specialized literature are found studies approaching this problems, but there are no studies concerning the concentration and specialization of countries or regions by European funds.
According to Goschin et al regional specialization expresses the territorial perpective
emphasizing the distribution of economic activities by comparing with the situation at the country level, while the geographical concentration of an economic activity mirrors its geographical distribution.
)n order to be achieved a structural analysis it should be selected a system of statistical measuring indicators, should be established the study duration, geographical coverage and degree of specialization. Moga L. M.
(allet has developed a system of indicators for measuring the concentration, clusters and
index of income, based on gross added value, gross domestic product and location elements. (allet
considers the study prepared by Molle for the Europe of fifteen as as the most spread study which
processes and analyzes the information provided at regional level. The study covered the period from to
, being based on information about population employment from seventeen economic activities.
The case studies carried out so far have several common features Moga L. M. :
− most studies use data collected at national level;
− the periods concerned are between and years, depending on the availability of statistical data;
− the indicators calculated and analyzed take into account aspects related to concentration and
specialization.
An interesting study on the evolution of regional specialization and concentration refers to the
agriculture of development regions in Spain and was conducted by Mora and Carlos . The study
consisted of analyzing the effects had by the Common Agricultural Policy CAP implementation, as a result of joining the European Union.
)n the case of Romania there have been no studies of such spread. Several studies were carried out using gross added value for calculating the (erfindahl index, Krugman index and coefficient of structural changes. )t was also used population employment for calculating the (erfindahl and Krugman indices, at
branch and regional level, for measuring the concentration and specialization Goschin et al, ; Trăistaru
etc., . A system of indicators based on population employment by activities of the local economy and
elements of location was conducted by Constantin et al. .
2. Methodology
The development of methodological framework aims at defining the concepts of regional specialization, establishing the statistical measurement methods as well as analyzing the interaction between regional specialization and European funds concentration.
The research proposes analyzing the regional specialization and European funds concentration in the
Central and Eastern European countries except Croatia which joined the EU in . Austria and Germany
will be taken into consideration, first of all because, geographically, they belong to the Central Europe, and secondly because they are standard countries in the European Union, in regard to which we can relate the evolution of new members. The EU integration has generated many changes in the member countries. The study aims to verify whether the European funds absorption has generated changes in the developments of GDP and productivity in the context of focusing the European funds on certain directions and specializing the countries in certain areas.
The first stage consisted of collecting data and information needed for carrying out the study. They were taken from EUROSTAT, correlated and analyzed for the twelve Central and Eastern European countries Bulgaria, Estonia, Latvia, Lithuania, (ungary, Poland, Romania, Slovenia and Slovakia, Austria, Germany .
Two periods have been taken into account, - and - , considering that the expenses
structure is different in these periods.
The second stage was the calculation of (erfindahl – (irschman index for countries in the Central and Eastern Europe, by each year and category of expenses.
The third stage was to analyze the results obtain and correlate them with the situation at European level.
Geographical concentration is defined as the weight of various regions counties within a particular sector of economic activity industry . A particular branch of industry is "concentrated" if a large part of production is achieved by a small number of regions counties .
Regional specialization and geographical concentration of the industry can be characterized through
certain absolute and relative indicators. The (erfindahl index measures absolutely the regionalspecialization
and geographical concentration, while the dissimilarity index proposed by Krugman measures relatively the same elements as the transformed Gini )ndex.
Krugman Index used in the analysis of regional specialization and concentration of economic activities ensures a relative measurement of these concepts. )s calculated in two forms:
Krugman )ndex for regional specialization
K
Si∑
=−
=
m 1 j j S ij Si
g
g
K
Krugman index for concentration of economic activities C
j
K
.∑
=−
=
n 1 i i C ij Cj
g
g
K
X
X
g
ii
=
şiX
X
g
j=
jwhere:
i is the region or county;
j is the economic activity or its sub-activity;
X is the employed civil population by economic activities, for the total national economy;
Xj is the civil population employed in the j economic activity;
Xi is the civil population employed in the i region;
C ij
g
is the percentage of i region in the total of j economic activity;S ij
g
is the percentage of j economic activity in the total amount of i region.Herfindahl–HirschmanIndex ensures the measurement and analysis of regional specialization and concentration in absolute amounts. The values recorded by the (erfindahl-(irschman )ndex increase together with the rising of concentration or specialization. The maximum amount it can reach is . When this
value is reached, it means that the i economic activity is concentrated entirely in j region, or that the region is
specialized in one economic activity. The minimum level of concentration is reached when the 1/j ratio has
the same value for all regions, which means that the j economic activities have the same weight in all regions.
The minimum level of specialization is met when the 1/j ratio is the same for all economic activities, meaning
For the study being, we chose the Herfindahl-Hirschman Index for analysis. )n this context, the variables have become:
For (erfindahl–(irschman )ndex: i is the country;
j is the expenditure category;
X is the expenditure million euros or euro/pers. ;
Xij is the expenditure million euros or euro/pers. for the j expenditure category from i country;
Xj r is the total expenditure of the countries milioane euro sau euro/pers. for a j expenditure category;
Xi is the expenditure from i country for allexpenditure category;
C ij
g
is the percentage of i country in the total of expenditure calculated at the level of j expenditure category;S ij
g
is the percentage of j expenditure category in the total of expenditure from i country;C j
H
isthe degree of concentration of a j expenditure category in an i number of countries;S i
H
isthe degree of specialization of an i country by a number of j expenditure categories.3. Regional Specialization and Concentration of European Funds in Central and Eastern Europe Analysis of regional specialization and concentration of European funds
Any country should specialize in certain directions where it possesses better advantages. By extrapolation, countries should spend EU funds in such directions that would bring the highest advantage. Despite the great heterogeneity, it is found that the new Member States of the European Union are becoming increasingly close to the economic profile of the old European countries.
Table 1: Herfindahl–Hirschman specialization index calculated for Central and Eastern European Countries for 2000 – 2006
HSi countries (specialization) 2000 2001 2002 2003 2004 2005 2006
Bulgaria , , , , , , ,
Cezch
Republic , , , , , , ,
Germany , , , , , , ,
Lithuania , , , , , , ,
(ungary , , , , , , ,
Austria , , , , , , ,
Poland , , , , , , ,
Romania , , , , , , ,
Slovenia , , , , , , ,
Slovakia , , , , , , ,
Estonia , , , , , , ,
Latvia , , , , , , ,
Source: EUROSTAT data processing
Analyzing the values recorded by the (erfindahl-(irschman )ndex for the countries of Central and
Eastern Europe CEE , during - , synthetized in Table , it is observed that, for the period
-, most countries except Germany and Austria have a high degree of specialization in a particular
category of expenditures, the indicator values being very close to the maximum limit. Between - ,
after joining the European Union of the Czech Republic, Estonia, Latvia, (ungary, Poland, Slovenia and Slovakia, it may be noticed a decrease of their specialization in using certain categories of expenditure.
This specialization evolution is due to the fact that the countries that joined in , after that date,
Tabelul 2: Herfindahl–Hirschman concentration index for a special categorie of expenditure calculated for Central and Eastern European Countries for 2000 – 2006 (mil euro)
HCj countries (concentration) 2000 2001 2002 2003 2004 2005 2006 Common
Agriculture Policy , , , , , , ,
Structural Reform
Policy , , , , , , ,
)nternal policy , , , , , , ,
External Actions , , , , , ,
Administrative
expenditures , , , , , , ,
Reserves Pre-accession
strategy , , , , , , ,
Compensations , , ,
Source: EUROSTAT data processing
From the analysis of values recorded by the (erfindahl-(irschman concentration index of a category
of expenditure, calculated for the period - in millions of euros and euros/ person, synthetized in
the table above, it is noticed that during - most of expenditure categories records increased values
of the concentration.
Expenses for the common agricultural policy, structural reform policy, domestic policy is at the higher limit of calculated values, which means that these activities have a higher level of concentration compared to the other categories of expenditure included in the study.
)t can be observed that the degree of concentration by expenditure category in euros/ person, maximum calculated at around . %, is lower than the concentration degree by category of expenditure in million euros, maximum calculated of about . % , this being due to the fact that the amount of expenditure expressed in euros/ person at the level of each of the states, is more uniform than the amount of expenditure incurred by each state, in millions of euros.
Figure 1. Herfindahl – Hirschman Index concentration index
Source: EUROSTAT data processing
Between - , after joining the European Union of the Czech Republic, Estonia, Latvia,
expenditure categories. This concentration evolution is because the countries that joined in , after that date, gained access to all categories of expenditure, previously usable only by the old Member States within
the Central and Eastern Europe CEE , namely Germany and Austria.
Table 3: Herfindahl–Hirschman specialization index, calculated for Central and Eastern European Countries for (ECE 12) beetwen 2007 – 2011
HSi countries (specialization) 2007 2008 2009 2010 2011
Bulgaria , , , , ,
Cezch Republic , , , , ,
Germany , , , , ,
Lithuania , , , , ,
(ungary , , , , ,
Austria , , , , ,
Poland , , , , ,
Romania , , , , ,
Slovenia , , , , ,
Slovakia , , , , ,
Estonia , , , , ,
Latvia , , , , ,
Source: EUROSTAT data processing
Analyzing the values recorded by the (erfindahl-(irschman )ndex for the countries of Central and
Eastern Europe ECE for the period between – , summarized in Table , it is noted that during
- , most countries, except Bulgaria and Romania, have a high degree of specialization in a particular
category of expenditure, particularly for sustainable growth and preservation and management of natural resources, the indicator values being calculated at a maximum of around . %. Bulgaria and Romania, as new Member States within the EU, managed to spend less European funds, which are spread among all categories. The small degree of expenditure incurred from the EU funds is best viewed in their expression in
euros/person. )n the case of Romania, in can be noticed a value of euros/person, compared to
Bulgaria, euros/person and Lithuania euros/pers.
Between – , it can be seen an increase in the specialization of Bulgaria and Romania in
using certain categories of expenditure. This evolution of specialization is due to the fact that, after , all
countries have acquired access to several European projects and programs, mostly being directed for Sustainable Growth CF and FS and Preservation and management of natural resources expenditure related to agricultural and fishing markets and to direct aid in order to increase competitiveness, economic and social cohesion, blurring the gaps between the development levels of the new Member States and of those which have previously joined the European Union.
Tabelul 4: Herfindahl–Hirschman concentration index for a special categorie of expenditure calculated for Central and Eastern European Countries beetwen 2007 – 2011
HCj countries
(concentration) mil euro
2007 2008 2009 2010 2011
Sustainable growth , , , , ,
Preservation and management
of natural resources , , , , ,
Citizenship, freedom, security,
justice , , , , ,
EU - global partner , , , , ,
Administration , , , , ,
Compensations , , ,
Analyzing the values recorded by (erfindahl-(irschman )ndex for concentration of using a certain
categories of expenditure, calculated for the period - in million euros and euros/person,
summarized in Tables and , it is noted that during - most expenditure categories recorded low
levels of concentration, except for expenses belonging to the category of s and the EU as a global partner, the latter being at the upper limit of calculated values. This is due to the fact that only Romania and Bulgaria have benefited in this period by compensations from the EU, as new Member States, and by the n+ rule of using the pre-accession funds.
During the period - , it can be seen a levelling to a low level of concentration concerning
the use of certain categories of expenditure.
The concentration degree by category of expenditure in euros/ person, maximum calculated of around . %, is smaller than the degree of concentration by category of expenditure in million euros, maximum calculated of . %, due to the fact that the amount of expenses expressed in euros/person at the level of each of the states is more uniform than the expenditure incurred by each state, in million euros.
Table 5 Herfindahl–Hirschman concentration index for a special categorie of expenditure calculated for Central and Eastern European Countries beetwen 2007 – 2011
HCj countries (concentration) euro/pers 2007 2008 2009 2010 2011
Sustainable growth , , , , ,
Preservation and management of natural
resources , , , , ,
Citizenship, freedom,
security, justice , , , , ,
EU - global partner , , , , ,
Administration , , , , ,
Compensations , , ,
Source: EUROSTAT data processing
(owever, in Romania and Bulgaria, is persisting a major discrepancy compared to the other states as
concerns the amount drawn from EU funds per capita, in Romania spent euros/ pers, Bulgaria
euros / pers and (ungary euros / pers.
This is due to the lack of national co-financing, setting inadequate priorities for funding, non-integrated approach regarding the connections between the involved institutions, financial corrections, interruption of payments, exaggerated complexity of national working procedures, use of untrained and inexperienced staff.
This specialization evolution is because following , most countries managed to access more
European programs, such expenditure being channeled into sustainable growth FC FS and the conservation and management of natural resources expenditure related to agricultural fishing markets,and direct aid in order to increase competitiveness, economic and social cohesion, lowering the gaps among the development levels of the new Member States and of those acceding to the European Union.
4. Conclusions
The European integration has generated two types of location effects: first inside the Member States where regional disparities have deepened to the extent of increasing the integration and second among Member States, being seen a diminishing of disparities against the dispersion of economic activity at
Community level. These effects confirm the cumulative causation theory Robson of Myrdal,
(irschman and Kaldor according to which the initial disparities perpetuate cumulatively through the migration of production factors and increase in trade exchanges.
Migration of production factors can generate increasing revenues, which means that are created flows of capital, labor, goods and services from the rich regions to poor ones. The process by which the initial advantage in the development of the region is supported and fed was named polarization by (irschman and dispersion by Myrdal. When the dispersion effects at the level of an integrated space are strong enough, all economies benefit from the growth of the central area. The only problem is that of different growth rates that result in disparities or enlarge the existing ones.
According to (irschman's theory, the dispersion effects counteracts a part of the effects which causes the increase of convergence degree between economies. Myrdal considers that when the dispersion effects are reduced, the success of fast-growing regions hamper the development of other areas from a given space.
concentration, while concerning the specialization by nations is observed a reallocation of industries. At sub-national level industry is more concentrated spatially. Overcrowding, which means concentration, and dispersion meaning anti-concentration, operate simultaneously, causing the geographical distribution of economic activity.
)n this context, the overall goal of this research is to extend the use of indices of concentration and specialization and to relate the results. The case study covered by this research has an experimental nature and intends to check the possibility of applying index-based method, not only at the categories of expenditure level, but also at the level of expenditure subcategories. Throughout the research it was pursued to develop a methodological framework for the study of regional specialization and concentration of European funds in Central and Eastern European countries.
The research will be continued through the activity of elaboration and validation of methods that will allow increasing the efficiency of using European funds on regions and other territorial sub-divisions in order to achieve the main objective of the European Union, that is, to reduce disparities between Member States.
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