Austria shares borders with the following former Communist countries; the Czech Republic, Slovakia, Hungary, and Slovenia. Table 5.1 displays the distribution of Austrian industry employment across regions over the period 1991-2001. Since five out of nine Austrian NUTS 2 regions11 border next
to Eastern European countries, I use data at the more disaggregate level of NUTS 3 in order to classify the districts into border, capital, and other regions.
10See the Appendix (A. Definition for distribution (Section 5.4)) for a detailed descrip-
tion of how regions are defined.
Table 5.1: Distribution of Industry Employment in Austria
distribution in percent of national industry employment
1991 1995 1998 2001 border regions 16.9 16.8 17.0 17.7 capital region 24.0 22.5 20.9 18.7 other regions 59.2 60.7 62.1 63.7
Notes: Regions are defined according to NUTS 3. See Appendix for further details.
Source: Own calculations based on data from Statistics Austria.
The table suggests that Austria experienced a decentralization of its pro- duction. It is striking that the employment shifted dramatically away from Vienna towards border regions and western regions. The share of industry employment in regions which border the new EU members has risen slightly from 16.9 to 17.7 during the period of ten years under consideration. More- over, the movement to western regions which border on Germany and Italy, was more pronounced. It occurred mainly after 1995, the year of Austria’s accession to the European Union. Therefore for Austria, it seems to be the case that the effect of the own accession dominates forces of agglomerating at the border to Eastern Europe.
Table 5.2: Distribution of Industry Employment in Germany
distribution in percent of national industry employment
1991 1995 1998 2001 border regions 9.1 8.4 8.4 7.9 capital region 3.3 3.0 2.7 2.4 other regions 87.5 88.5 88.9 89.7
Notes: Regions are defined according to NUTS 3. See Appendix for further details.
Source: Own calculations based on data from the Federal Statistical Office of Germany.
Table 5.2 shows the geographic distribution of industry employment in Germany for the years 1991-2001.12 As in the case of Austria, the employ- ment shifted away from the capital region. Furthermore, also the relative
12Using data on German districts at the NUTS 3 level, I declare districts which border
directly and indirectly to Poland and the Czech Republic as border regions. Germany is broken down in 439 administrative districts.
industry employment has diminished in border regions. Facing the tremen- dous re-structuring in Eastern Germany, the changes in spatial distribution appear only marginal.
However, a closer look at the case of Eastern Germany reveals a sub- stantial shift towards regions which border Western Germany. In 2001, 17.8 percent of the Eastern German industry employment13takes place in districts at ’inner German border’, while it was only 14.1 in 1991. The employment in Eastern German regions bordering Poland and the Czech Republic increased slightly from 31.8 to 32.7 percent of total employment of the ’New L¨ander’ but declined in percent of national employment from 7.1 to 5.7 during the period 1991 and 2001. In the Western German border regions to the Czech Republic, the agglomeration remains unchanged.14 While 12.9 percent of the Bavarian industry employment was located in border regions in 1991, ten years later it was with 12.8 percent almost the same.
It appears that the economic geography of both Western European coun- tries is less affected by opening-up of Eastern Europe. The European Com- mission states that Western European border regions might even lose in the short-run. However, they expect that those regions gain in the long-run due to their central location.15
Why does the economic integration of Eastern and Western Europe have no impacts on the agglomeration structure in Austria and Germany? First, Eastern Europe plays only a minor, if increasing role as trading partner for Austria and Germany. In 2002, 17.6 percent of Austria’s exports went to Eastern Europe, while more than 60 percent were shipped to the EU-15 region. However, in the year 1989 when the Iron Curtain fell, only 9 percent of exports flowed to Eastern Europe. Germany is even less integrated with Eastern Europe than Austria. However, the exports to this region grew from 6.9 percent in 1989 to 11.7 percent in 2003. At the same time, the exports to other EU-15 countries are more than four-times as large.16 It seems to be
13Excluding Berlin.
14In Western Germany, only Bavaria borders directly on Eastern Europe.
15 See European Commission (2001) for an outline of the impacts of the Eastern EU-
enlargement on the Western European border regions.
obvious that the small size of Eastern Europe relative to the large market of the pre-2004 European Union plays a crucial role. The trade orientation implies that Austrian and German economic activity might be concentrated rather in regions which border other EU-15 members. This is in line with the mentioned ’Blue Banana’.
A second factor for the slight effects on the industry location in Austria and Germany might be the spatial pattern which established over decades. The emerged economic geography appears to be stable since the agglomera- tion forces are sufficiently strong. The incentives for firms to relocate their production sites to regions along the border with Eastern Europe are of less importance. On the other hand, if they decide to move they will move the production stages immediately offshore to Eastern Europe.