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Investigating the Convergence Hypothesis in the Eu: More Evidence Accounting for Structural Breaks

In: EU Crisis and the Role of the Periphery

Author

Listed:
  • Xanthippi Chapsa

    (Aristotle University of Thessaloniki and Technological Educational Institute of Serres)

  • Constantinos Katrakilidis

    (Aristotle University of Thessaloniki)

  • Nikolaos Tabakis

    (Technological Educational Institute of Thessaloniki)

Abstract

The aim of this paper is to test the convergence hypothesis for the EU countries with Netherlands which is considered as the benchmark. The empirical analysis uses Gross Domestic Product (GDP) per capita in Purchasing Power Parity (PPP) in constant prices of 2005 and covers the period 1950–2010. The empirical approach complementarily employs unit root tests for stochastic convergence and a test proposed by Tomljanovich and Vogelsang (Empirical Econ 27: 49–62, 2002) and Nieswiadomy and Strazicich (Econ Inq 42: 323–340, 2004) that is based on Carlino and Mills’ (J Monet Econ 32: 335–346, 1993) methodology. Applying the unit root tests for the relative per capita real GDP series for each country, we are able to reject the unit root hypothesis for 6 out of 14 countries. However, our results suggest there is stronger evidence in favor of convergence when we account for one or two endogenous structural breaks in the intercept and slope of the trend function. Based on Carlino and Mills methodology, we found strong evidence of a catch-up process until the mid-1980 towards the Netherlands for all countries except for the UK, although, after 1985, it is clear that the economies show different behavior which is probably associated with differences in the growth process.

Suggested Citation

  • Xanthippi Chapsa & Constantinos Katrakilidis & Nikolaos Tabakis, 2015. "Investigating the Convergence Hypothesis in the Eu: More Evidence Accounting for Structural Breaks," Contributions to Economics, in: Anastasios Karasavvoglou & Serdar Ongan & Persefoni Polychronidou (ed.), EU Crisis and the Role of the Periphery, edition 127, pages 21-39, Springer.
    • Handle: RePEc:spr:conchp:978-3-319-10133-0_2
    DOI: 10.1007/978-3-319-10133-0_2
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    Citations

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    Cited by:

    1. Desli, Evangelia & Gkoulgkoutsika, Alexandra, 2021. "Economic convergence among the world’s top-income economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 841-853.
    2. Christos Kollias & Petros Messis, 2020. "Are future enlargement candidate countries converging with the EU?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(3), pages 453-473, August.
    3. Desli, E. & Gkoulgkoutsika, A., 2020. "World economic convergence: Does the estimation methodology matter?," Economic Modelling, Elsevier, vol. 91(C), pages 138-147.
    4. Ceylan, Reşat & Abiyev, Vasif, 2016. "An examination of convergence hypothesis for EU-15 countries," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 96-105.

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