Austrian border regions and eastern integration: A low competitiveness - high growth paradoxon

Many regions on the EU Eastern borders have developed favourably after the opening up of the border and the implementation of association agreements with the CEECs. This was often seen as a positive sign for the further perspectives of these regions after EU enlargement. In this paper we take a closer look at the mechanisms involved in a case study for Austria. Based on a very disaggregated data set at a regional as well as sectoral level we find that neither sectoral preconditions nor locational advantages can explain the good performance of (rural) border regions after 1989. Using multivariate cluster analyses we group 3-digit-industries to theoretically founded typologies indicating different sector characteristics and find that (fast growing) rural border regions are dominated by industries that show disadvantageous characteristics for eastwest trade. Furthermore, we identify locational factors relevant for regional growth in a traditional Barro-style growth regression and find a regional distribution of these factors in Austria, which also places rural border regions at a disadvantage. Rather than these factors or advantages from proximity to the new markets, impacts internal to the Austrian markets seem to determine regional growth patterns in the 1990s. Therefore it would be misleading to take a stable development of rural border regions after EU enlargement for granted due to past experiences.