Industrial Specialisation and Geographic Concentration : two sides of the same coin ? Not for the European Union

This paper is about structural change within European Manufacturing since 1985, thereby covering the key period in the ongoing processes of European integration and world wide globalisation. It focuses on whether the Member States are becoming more specialised in their industrial structures, and, if so, whether this means that industries are also becoming more geographically concentrated within the European Union. Perhaps counter-intuitively, we find that, although specialisation has indeed increased, concentration has moved in the opposite direction. In order to explain this, we derive a formal relationship between the two concepts which shows how increasing industrial specialisation has been offset by faster growth by the smaller Member States, with the net effect that industries have become somewhat less geographically concentrated. We suggest one potential theoretical explanation by drawing upon recent work by Fujita, Krugman and Venables (1999)