Regional business-cycle synchronization, sector specialization and EU accession

Abstract:

We examine the effects of Eastern and Northern enlargement of the EU on regional business-cycle synchronization and sector specialization.

Difference-in-difference estimates show that cyclical synchronicity decreased and differences in sector structure increased in acceding region-pairs after Eastern enlargement.

For Northern enlargement, results are more ambiguous. Moreover, in both enlargement episodes, region-pairs with highly synchronous business cycles before accession experienced weaker cyclical and structural convergence than region-pairs with less synchronous cycles.

Likewise, region-pairs with more similar sector structures before accession experienced stronger divergence (or weaker convergence) of structural similarity and business-cycle synchronicity after the enlargement.

We argue that these results call for developing more differentiated hypotheses on EU enlargement's effects on business-cycle synchronization and sector specialization.