Evolving Structural Patterns in the Enlarging European Division of Labour: Sectoral and Branch Specialisation and the Potentials for Closing the Productivity Gap

The report summarises the results generated in empirical analysis within a larger EU's 5th framework programme for research and development on the determinants of productivity gaps between the current EU-15 and accession states in central and eastern Europe. The focus of research in this part of the project is on sectoral specialization patterns emerging as a result of intensifying integration between the current EU and a selection of six newly acceding economies, namely Estonia, Poland, the Czech and Slovak Republics, Hungary and Slovenia. The report is concerned with the role played by the respective specialisation patterns for the explanation of observed productivity gaps and for the projection of future potentials of productivity growth in central and eastern Europe. For the aggregated level, analysis determines the share of national productivity gaps accountable to acceding countries' particular sectoral patterns, and their role for aggregate productivity growth: in Poland, Slovakia and Hungary, sectoral shares of national productivity gaps are considerable and might evolve into a barrier to productivity catch-up. Moreover, past productivity growth was dominated by a downward adjustment in employment rather than structural change. With the industrial sector of manufacturing having been identified as the main source of national productivity gaps and growth, the subsequent analysis focuses on the role of industrial specialisation patterns and develops an empirical model to project future productivity growth potentials.