Abstract/Summary

We examine if and how deeper economic integration with high-income nations impacts industrial performance. We exploit Poland’s accession to the European Union in 2004 as a source of variation in the degree of market integration with Germany. Using data on Polish manufacturing firms in the period 1995-2013, we find that EU accession was followed by significant within-firm growth in output and productivity, notably in industries in which Germany was more specialised at the moment of accession. Increased flows of German investment to these sectors played an important role in shaping these effects.