Abstract
In this article, the degree of integration between European countries is linked to the evolution of the pattern of trade. Evolution of the long-run sensitivity between European outputs is estimated by recursive Fully–Modified Ordinary Least Squares (FM-OLS) and compared to a recursive index of intra-industry trade. Significant correlations are found between integration and intra-industry trade share: positive for most countries but negative for others. The explanatory variable seems to be the initial intra-industry trade share.
Acknowledgements
I thank Christophe Tavéra, Sébastien Pommier and participants of the seventh annual conference of the European Trade Study Group for helpful comments.
Notes
1 See Rassekh (Citation2004) for a recent survey.
2 See Crespo et al. (Citation2002) for critics of the LP's ratio and Keller (2004) for a recent survey of the literature.
3 ‘Main economic indicators’ database for production series and ‘Monthly International trade’ database for import series.
4 The working paper with results of unit root tests is available on the author's website.
5 Graphs are not reported in this version but are available on the author's website. They confirm the presence of two breaks.