Potential switchovers in competitive / comparative advantage; patterns of industrial convergence and clustering of South East European countries

Abstract

The Southeast Europe is regarded to be the least developed region, thus the most promising region of Europe for growth. Many of the economies in Southeast Europe tend to be relatively closed. Furthermore, the trade linkages among the countries of Southeast Europe (Bulgaria, Croatia, Greece, Romania, Slovenia and Turkey in particular) themselves are quite limited. In other words, the shares of the exports of each country in Southeast Europe to the rest of the region tend to be relatively small, given the geographical proximity of those countries. These shares are typically in the range of between 15% and 30%. On the other hand, since the turn of the millennium up to the 2008/09 financial and economic crisis, rising current account deficits of many countries in Southeast Europe have been taken as an indication of declining competitiveness. In order to sustain high growth rates and exit from the crisis, accession to the EU has become obsession for SEE countries; in this respect, countries tend to neglect their neighbours and focus on their relations with the forefront of the EU economy, i.e. Germany, Italy and even Austria, hoping to enjoy spillovers of the development of Western European countries. However greater integration within the South East Europe an region could and should serve as a significant driver of a sustained economic recovery. Given this background, one of the main aims of this research is to explore in detail trade relations between SEE countries and their determinants. In fulfilling this aim, this thesis examines the revealed comparative advantage (RCA) index for the respective economies. Based on the findings, it can be said that trade relations among the SEE countries is still insignificant in comparison to their potential. Moreover, trade patterns indicate that countries do not utilize intra-industry trade in promoting both sides (exporter and importer) interests, but are neglected.