Understanding European Integration with Bipartite Networks of Comparative Advantage

TL;DR

This paper uses bipartite networks and the Revealed Comparative Advantage method to analyze sectoral specialization and productivity convergence within the EU, highlighting differences between EU15 and CEE countries.

Contribution

It introduces a bipartite network approach to assess co-specialization and division of labor in the EU at industry and country levels.

Findings

Significant co-specialization among CEE countries.

Diverging specialization between EU15 and CEE.

Productivity growth linked to intra-CEE co-specialization.

Abstract

Core objectives of European common market integration are convergence and economic growth, but these are hampered by redundancy, and value chain asymmetries. The challenge is how to harmonize labor division to reach global competitiveness, meanwhile bridging productivity differences across the EU. We develop a bipartite network approach to trace pairwise co-specialization, by applying the Revealed Comparative Advantage method, within and between EU15 and Central and Eastern European (CEE). This approach assesses redundancies and division of labor in the EU at the level of industries and countries. We find significant co-specialization among CEE countries but a diverging specialization between EU15 and CEE. Productivity increases in those CEE industries that have co-specialized with other CEE countries after EU accession, while co-specialization across CEE and EU15 countries is less related to productivity growth. These results show that a division of sectoral specialization can lead to productivity convergence between EU15 and CEE countries.