Integration and transition: Scenarios for the location of production and trade in Europe

Economics of Transition Volume 10 (1) 2002, 93–117

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Table 2. Key characteristics – Base case 1992

The region’s share (measured in percent) of:

World World manufacturing World production of GDP exports imports energy agriculture

EuropeW 12.09 17.65 17.70 12.52 8.71 EuropeC 11.75 18.50 17.88 7.09 3.54 EuropeS 8.27 8.84 8.80 7.34 6.05 EuropeN 1.96 3.51 3.45 2.16 1.69 EuropeE 0.89 2.06 2.78 1.53 2.57 FormSOV 2.21 0.78 0.78 3.79 2.11 CSAsia 3.17 4.39 4.37 3.12 17.07 SEAsia 20.27 20.80 20.80 12.94 18.31 USACAN 27.71 15.74 15.75 20.46 16.07 RestofW 11.67 7.73 7.69 29.05 23.87

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Table 3. The pattern of manufacturing specialization

Share of the industry’s value added relative to share of total manufacturing value added

EuropeW

EuropeC

EuropeS

EuropeN

EuropeE

Form SOV

CSAsia SEAsia USA& CAN

Rest of World

Textiles 0.78 0.58 1.61 0.53 1.59 0.73 2.51 0.86 0.78 1.71

Leather 0.88 0.56 3.15 0.72 2.75 0.22 2.17 0.86 0.34 1.68

WoodProd 1.06 0.91 0.87 1.63 1.03 1.12 0.48 0.84 1.25 0.91

Metals 0.96 1.05 1.15 1.19 1.16 1.04 0.82 1.07 0.90 0.95

Minerals 0.92 0.70 1.17 1.06 1.57 1.52 1.87 0.92 0.74 1.67

Chemical 1.06 0.98 0.92 0.83 0.89 0.88 0.84 0.97 1.06 1.05

FoodProd 1.08 0.81 1.13 0.89 1.31 1.13 0.92 0.94 0.84 1.57

TransEq 1.15 1.32 0.84 0.84 0.47 1.09 0.38 0.87 1.23 0.61

Machines 0.95 1.18 0.74 1.01 0.60 0.90 0.70 1.22 1.10 0.44

OtherMan 0.96 1.48 0.54 0.64 0.91 0.73 3.74 0.95 0.66 1.01

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Table 4. Geographical patterns of manufacturing sales

Distribution (in percent) of total sales of manufactures from a region

Sales to EuropeW

EuropeC

EuropeS

EuropeN

EuropeE

Form

SOV

CSAsia SEAsia USA&

CAN

Rest of World

From

EuropeW 69.3 11.2 6.9 1.4 0.5 0.3 0.5 2.5 3.6 3.7

EuropeC 11.9 71.3 5.5 1.9 1.4 0.6 0.4 2.4 2.5 1.9

EuropeS 8.1 7.0 78.0 0.6 0.6 0.4 0.2 1.3 1.8 2.1

EuropeN 8.6 7.9 2.7 73.5 0.5 0.5 0.4 1.8 2.6 1.4

EuropeE 3.6 10.5 3.6 1.0 74.8 1.2 0.6 0.9 0.8 3.1

FormSOV 0.7 0.9 0.5 0.4 0.5 94.3 1.3 0.7 0.3 0.5

CSAsia 1.1 0.9 0.5 0.1 0.1 0.6 82.0 7.2 4.7 2.9

SEAsia 1.3 1.2 0.5 0.2 0.1 0.1 1.6 87.5 5.3 2.3

USACAN 1.8 0.9 0.5 0.2 0.1 0.1 0.4 3.1 89.4 3.5

RestofW 1.4 0.9 0.8 0.1 0.2 0.1 0.5 2.2 4.1 89.8

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Table 5. Summary of trade distortions, scale economies

Average intra EEA trade

costs*

Trade costs on exports from EuropeE into

EEA*

Returns to scale**

Share of inputs from

own sector in total costs***

Textiles 4.7 29.3 0.06 0.357 Leather and Products 3.7 10.8 0.06 0.192 Wood Products 0.6 6.5 0.12 0.239 Metals 4.5 11.4 0.16 0.259 Minerals 7.0 16.7 0.10 0.272 Chemicals 6.5 20.6 0.24 0.279 Food Products 15.1 46.7 0.08 0.128 Transport Equipment 2.3 9.3 0.26 0.185 Machinery 2.6 6.1 0.20 0.203 Other Manufacturing 3.1 6.3 0.08 0.055

Notes: *Percentage of producer price, averaged over the four EEA regions; **Percent reduction in average cost (AC) with a one-percent increase in output; and ***Based on Eastern European input-output matrices.

Table 6. Value-added shares (based on Europe East).

Skilled labour Unskilled labour

Capital Skilled/ unskilled

ratio

Labour/ capital ratio

PubServ 0.476 0.321 0.203 1.483 3.926 PrivServ 0.140 0.436 0.424 0.321 1.358 Textiles 0.085 0.583 0.332 0.146 2.012 Leather 0.081 0.571 0.348 0.142 1.874 WoodProd 0.085 0.561 0.354 0.152 1.825 Metals 0.087 0.534 0.379 0.163 1.639 Minerals 0.077 0.492 0.431 0.157 1.320 Chemical 0.108 0.42 0.472 0.257 1.119 FoodProd 0.073 0.424 0.503 0.172 0.988 TransEq 0.127 0.584 0.289 0.217 2.460 Machines 0.148 0.531 0.321 0.279 2.115 OtherMan 0.073 0.579 0.348 0.126 1.874 Agricult 0.009 0.504 0.145 0.018 3.538 Energy 0.036 0.301 0.405 0.120 0.832


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Table 7a. Real income effects (percent change from base case)

Productivity Risk premium Liberalization

2.5 % 5% –5% –10% 10% 20%

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Table 7b. Decomposing the real income changes for Europe East

Endogenous capital stock

Constant capital stock

End. cap. stock. minus return to ''K

Productivity 5% 15.88 7.61 10.43

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Table 8a. Changes in total manufacturing exports (percent change from base case)


2.5 % 5% –5 % –10% 10% 20%

EuropeW 0.14 0.29 0.10 0.20 0.20 1.41 EuropeC –1.64 –3.27 –1.03 –2.06 –2.35 –9.73 EuropeS –0.19 –0.39 –0.12 –0.23 –0.13 –0.42 EuropeN –0.82 –1.63 –0.50 –1.00 –0.43 –1.15 EuropeE 16.76 34.94 9.98 20.52 21.60 101.48 FormSov –0.25 –0.50 –0.15 –0.30 –0.28 –0.67 CSAsia –0.22 –0.44 –0.12 –0.25 –0.48 –1.06 SEAsia 0.03 0.07 0.02 0.05 –0.01 0.06 USACAN 0.03 0.06 0.03 0.06 –0.01 0.09 RestofW –0.20 –0.40 –0.12 –0.25 –0.16 –0.45

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Table 8b. Changes in total manufacturing imports (percent change from base case)


2.5 % 5% –5% –10% 10% 20%

EuropeW –0.49 –0.95 –0.31 –0.62 –0.74 –2.64 EuropeC 0.87 1.82 0.53 1.08 1.39 7.14 EuropeS –0.11 –0.17 –0.08 –0.14 –0.23 –0.30 EuropeN –0.01 0.03 –0.01 –0.01 –0.34 –0.91 EuropeE –0.93 –1.85 –0.58 –1.16 –0.61 –4.98 FormSov 0.78 1.68 0.46 0.95 0.17 1.86 CSAsia 0.11 0.25 0.07 0.15 0.04 0.34 SEAsia –0.18 –0.34 –0.10 –0.21 –0.26 –0.74 USACAN –0.14 –0.27 –0.09 –0.17 –0.18 –0.45 RestofW 0.14 0.31 0.09 0.18 0.03 0.49


4.2 Sectoral effects

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Table 9. Production effects in Europe East (percent change from base case)


2.5 % 5% – 5 % – 10% 10% 20%

Public service 4.55 9.38 2.39 4.86 0.56 3.05 Private service 6.00 12.35 4.00 8.22 1.68 7.37 Textiles 14.00 28.84 8.75 17.93 42.08 179.16 Leather 10.61 21.99 6.73 13.86 12.09 44.03 Wood Prod. 7.94 16.32 5.03 10.30 2.81 12.89 Metals 12.30 24.93 7.96 16.14 4.66 15.94 Minerals 9.01 18.40 5.94 12.12 2.96 11.05 Chemicals 9.09 18.73 5.80 11.94 6.19 23.96 Food Prod. 7.29 15.32 4.51 9.38 3.63 16.91 Trans.Eq. 37.15 74.97 23.11 46.66 23.92 71.81 Machines 18.16 37.05 11.56 23.51 1.56 10.50 OtherMan 9.62 19.76 6.11 12.50 2.95 15.83 Agriculture –5.58 –11.33 –4.95 –9.93 –10.45 –46.92 Energy –4.28 –9.04 0.07 0.03 –14.82 –63.12

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Table 10. Real wages in Europe East (percent change from base case)


2.5 % 5% –5 % –10% 10% 20%

Skilled labour 10.70 22.40 7.20 15.00 5.00 22.80 Unskilled labour 8.50 17.80 5.70 11.80 3.10 14.50

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Table 11. Mark-up Ratios

Pratten Martins, Scarpetta and Pilat

Textiles 1.05 1.13 Leather and Products 1.05 1.15 Wood Products 1.14 1.19 Metals 1.19 1.19 Minerals 1.11 1.27 Chemicals 1.31 1.24 Food Products 1.09 1.14 Transport Equipment 1.35 1.12 Machinery 1.25 1.31 Other Manufacturing 1.09 1.18

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Table 12. Real income effects II (percent change from base case)

Productivity Risk premium Liberalization 2.5% 5% –5.0% –10% 10% 20%

EuropeW 0.02 0.04 0.01 0.02 0.01 0.04 EuropeC –0.07 –0.13 –0.04 –0.08 –0.07 –0.24 EuropeS –0.01 –0.01 –0.01 –0.01 0.00 –0.02 EuropeN –0.02 –0.05 –0.02 –0.03 –0.03 –0.14 EuropeE 8.07 16.89 5.10 10.55 2.60 10.77 FormSov –0.01 –0.01 –0.01 –0.01 0.00 –0.02 CSAsia –0.07 –0.14 –0.04 –0.09 –0.09 –0.30 SEAsia 0.01 0.01 0.00 0.00 0.01 0.01 USACAN 0.00 0.00 0.00 0.00 0.00 0.00

RestofW –0.02 –0.04 –0.02 –0.04 –0.01 –0.08

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Table 13. Production effects in EuropeEast II (percent change from base case)


2.5% 5% –5 % –10% 10% 20%

Public service 4.70 9.68 2.48 5.04 0.49 2.27 Private service 6.23 12.84 4.15 8.52 1.71 6.48 Textiles 14.47 29.76 9.05 18.51 20.12 60.55 Leather 11.10 23.02 7.05 14.48 6.96 22.14 Wood Prod. 8.05 16.57 5.10 10.45 2.67 10.36 Metals 13.15 26.73 8.49 17.24 8.84 32.34 Minerals 8.84 18.02 5.82 11.86 4.20 15.51 Chemicals 9.67 19.94 6.16 12.69 5.23 16.44 Food Prod. 7.60 16.02 4.70 9.79 3.19 13.20 Trans.Eq. 42.08 85.74 26.12 53.02 60.77 229.87 Machines 18.99 38.74 12.08 24.55 5.63 24.79 OtherMan 9.84 20.24 6.25 12.77 3.35 13.15 Agriculture –6.17 –12.60 –5.30 –10.67 –10.40 –40.37 Energy –4.76 –10.20 –0.21 –0.62 –14.41 –54.17

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Integration and transition: Scenarios for the location of production and trade in Europe