International specialisation in production via the development of international trade and factor movements is the basis of much of the developed world′s prosperity. This article is concerned with the forces that drive specialisation in manufacturing in the developed countries, and particularly the role played by regional economic integration in the European Community. A distinction is drawn between specialisation that takes place within (intra) and between (inter) industries with emphasis here on the latter. Specifically, the analysis seeks to explain differences in the sectoral composition of industry between pairs of countries using regression analysis. Factor endowments, per capita incomes and country size are found to influence industrial similarity. Membership of the EC and participation in the EC‐EFTA free trade areas are associated with increased inter‐industry specialisation. Movement towards a European Economic Space could accentuate this phenomenon, with important adjustment implications.
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