Identifying the Importance of Countries in the EU Economy Using a Measure for Structural Changes Decomposition

Abstract

The main aim of the paper is to analyse the structural dynamics in the EU economy. It is based on one macroeconomic variable – GDP, calculated using the methodology employed by the World Bank. The research covers the years 1995–2014. The 28 member states that belonged to the EU at the end of the period are treated as the structural elements of the European economy.
A new measure for decomposing structural changes is used in the analysis. It takes into account changes in the values of the structural components, which is called the „size” of the structure (as opposed to „shape”, which concerns only the share of components). The decomposition measure makes it possible to evaluate changes in the importance of individual countries in the European economy, and the sign of a measure shows whether an increase or decrease has been observed. The sum of absolute values of decomposition measure comes out to one for each pair of time units compared.
GDP grew – more or less – in all of the countries during the period analysed, but the rates of growth differed (by country and time period), which produced changes in its structure.