Working Paper Series,
Trade Union Institute for Economic Research

Abstract: Has the European integration process lead to increased specialisation and what drives changes in specialisation? To address these questions we apply a model that incorporates endowments, technology and increasing returns to scale (IRS). Analyses reveal that countries with high capital accumulation have become increasingly specialised in capital-intensive industries; this holds for both human and physical capital while countries have diverged (converged) in physical (human) capital abundance. No increased concentration of IRS industries to large markets is found. Analysing R&D indicates scale economies in R&D at the firm level and that firm level R&D is what drives competitiveness. Finally, there is robust evidence for a domestic interdependency in industries specialisation patterns.

Keywords: Specialisation; Productivity; Trade; Technology; Technology transfers; R&D

JEL-codes: C29; F12; O33; O52

40 pages, May 3, 2002

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