EU enlargement: what does it change for the European economic geography?

This paper evaluates the effects of the enlargement of the EU to the Central and Eastern European Countries (CEECs), focusing on agglomeration and industrial specialisation patterns in Europe. We first present the theoretical debate based on the New Economic Geography models. The outcome is that, in spite of the lack of labour mobility within the EU, a core periphery schema is expected to occur as a result of vertical linkages. Then, we provide evidence on real and structural conver- gence and FDI trends in the enlarged EU. We show that sectoral divergence resulting from agglomeration economies is likely to persist through a high-skilled core attracting increasing intensive activities and a low-skilled periphery. By discussing two alter- native scenarios in terms of international specialisation, we show that Central European countries are likely to follow a "Spanish model" based on catching-up, industrial diversification and intra-industry trade, while Eastern countries could durably lag behind. Similarly, the Mediterranean economies, which are engaged in the Euro- Mediterranean partnership, exhibit very complementary international specialisation relative to the EU through resource- and labour-intensive industries.