The determinants and dynamics of regional convergence in the EU

In this study, we employ the pairwise stochastic convergence approach to identify the pairs of NUTS2 regions for all 28 EU Member States that exhibit co-movement in their growth dynamics, over the period 1980-2018. We then use the observed convergence trajectories to assess the role of first nature geography and second nature geography, in causing economic growth convergence patterns. We find that western and northern parts of Europe have higher pairwise convergence (and lower intra-country convergence) rates than regions in East and Southeast Europe. We find strong evidence that first and second nature geography drive cluster-like convergence dynamics. Regions with common locational characteristics (metropolitan, coastal, islands, and mountainous) tend to converge to each other, while they diverge from dissimilar regions. Regardless of national borders, contiguity and accessibility are significant drivers of convergence. Congruence in sectoral specialisation results in divergence, that could be driven by competing economic interests within the common market. The opposite holds for dissimilarities in specialisation, which could be explained by complementarity in the production process. Overall, we find strong evidence for club convergence at the top of the EU. Bottom regions with low market dynamism and poor economic development, do not converge to each other.