To what extent did Austria-Hungary experience sectoral specialization from 1867 to 1910?

Abstract: Abstract: Austria-Hungary was from 1867 to the beginning of the first world war, one of Europe’s largest countries and also a monetary and customs union exhibiting features common in recent debates on economic integration. The role of economic integration on growth, development and industrialisation are central themes in today’s debates. The effects of economic integration have been debated thus this thesis will illustrate changes in the size of employment in three different sectors answering: Was there convergence in sectoral employment in Austria-Hungary from 1867-1910? Using the idea of optimum currency areas and Krugman’s idea of increasing specialization caused by monetary unions is discussed on the backdrop of specialization found in Austria-Hungary. The specialization is investigated using the Theil indexes of dissimilarity. The result of the study show that the total dissimilarities increased however the differences in the sizes of the industry sector in Austria-Hungary showed decreasing values from 1890 to 1910. To further investigate the regions in Austria-Hungary, a hierarchical algorithm is applied to dissimilarity matrices to cluster regions creating macro-regions. These macro-regions show similar results as for the smaller regions, confirming that the results found were indeed macro-trends, were increased dissimilarity in agriculture was found and decreased dissimilarity in the size of industry employment.