Dis-embedded Openness: Inequalities in European Economic Integration at the Sectoral Level

TL;DR

This paper examines how European economic integration has increased sectoral inequalities and dependency patterns, with East European countries experiencing rising unevenness while core countries reduce theirs, revealing complex trajectories.

Contribution

It introduces an analysis of sectoral embedding and dependency in European economies, highlighting divergent paths of East European and core countries during integration.

Findings

East European economies show increasing unevenness and dependency with openness.

Core European countries decrease unevenness while increasing openness.

Countries are at a turning point, with some shifting towards core-like integration or retrogression.

Abstract

The process of European integration resulted in a marked increase in transnational economic flows, yet regional inequalities along many developmental indicators remain. We analyze the unevenness of European economies with respect to the embedding of export sectors in upstream domestic flows, and their dependency on dominant export partners. We use the WIOD data set of sectoral flows for the period of 1995-2011 for 24 European countries. We found that East European economies were significantly more likely to experience increasing unevenness and dependency with increasing openness, while core countries of Europe managed to decrease their unevenness while increasing their openness. Nevertheless, by analyzing the trajectories of changes for each country, we see that East European countries are also experiencing a turning point, either switching to a path similar to the core, or to a retrograde path with decreasing openness. We analyze our data using pooled time series models and case studies of country trajectories.