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Time stability of the beta convergence among EU countries: Bayesian model averaging perspective

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  • Próchniak, Mariusz
  • Witkowski, Bartosz

Abstract

This paper analyzes the time stability of the GDP beta convergence in two subsamples: EU27 countries during 1993–2010 and EU15 during 1972–2010. Additionally, the article checks for the strength and stability of influence of particular economic growth factors. In order to address the problem of variables' selection, Bayesian model averaging (BMA) is used while choosing the appropriate variables for the regression. In order to loose the assumption of stability overtime in the regression, interaction terms of particular regressors are introduced with time dummies (the whole sample is divided into time intervals and is allowed for structural breaks). Finally, in order to address the problem of potential inconsistency of “typically used” estimators, the study employs Blundell and Bond's GMM system estimator. The main findings are the following. (1) The EU27 countries converged at the rate of about 5% per annum while the EU15 countries—at 3% p.a., which is an enormous difference as compared with the widely cited 2% rate of convergence. (2) The pure mechanism of conditional convergence of the countries under study was rather constant over time: there were periods of more rapid or slower convergence but the differences were not as huge as one could expect. (3) The considered economic growth determinants exhibited very mixed and differentiated impact on economic growth in various subperiods.

Suggested Citation

  • Próchniak, Mariusz & Witkowski, Bartosz, 2013. "Time stability of the beta convergence among EU countries: Bayesian model averaging perspective," Economic Modelling, Elsevier, vol. 30(C), pages 322-333.
  • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:322-333
    DOI: 10.1016/j.econmod.2012.08.031
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    Cited by:

    1. Michał Bernardelli & Mariusz Próchniak & Bartosz Witkowski, 2017. "Cycle and Income-Level Convergence in the EU Countries: An Identification of Turning Points Based on the Hidden Markov Models," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 47, pages 27-42.
    2. Rokicki, Bartlomiej & Hewings, Geoffrey J.D., 2016. "Regional convergence within particular country — An approach based on the regional price deflators," Economic Modelling, Elsevier, vol. 57(C), pages 171-179.
    3. Valerija Botric, 2013. "Output Convergence between Western Balkans and EU-15," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 5(1).
    4. Niu, Linlin & Xu, Xiu & Chen, Ying, 2017. "An adaptive approach to forecasting three key macroeconomic variables for transitional China," Economic Modelling, Elsevier, vol. 66(C), pages 201-213.
    5. Michał Bernardelli, 2013. "Nieklasyczne modele Markowa w analizie cykli koniunktury gospodarczej w Polsce," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 30, pages 59-74.
    6. H. Lehmann & M. G. Silvagni, 2013. "Is There Convergence of Russia’s Regions? Exploring the Empirical Evidence: 1995 – 2010," Working Papers wp901, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Maciej Stefański, 2020. "To What Extent does Convergence Explain the Slowdown in Potential Growth of the CEE Countries Following the Global Financial Crisis?," Working Papers 2020-058, Warsaw School of Economics, Collegium of Economic Analysis.
    8. Marcin Grela & Aleksandra Majchrowska & Tomasz Michałek & Jakub Mućk & Agnieszka Stążka-Gawrysiak & Grzegorz Tchorek & Marcin Wagner, 2017. "Is Central and Eastern Europe converging towards the EU-15?," NBP Working Papers 264, Narodowy Bank Polski, Economic Research Department.
    9. Mariusz Prochniak & Bartosz Witkowski, 2016. "On The Use Of Panel Stationarity Tests In Convergence Analysis: Empirical Evidence For The Eu Countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(1), pages 77-96, March.
    10. Chang, Tsangyao & Chu, Hsiao-Ping & Ranjbar, Omid, 2014. "Are GDP fluctuations transitory or permanent in African countries? Sequential Panel Selection Method," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 380-399.
    11. Daniel Stavárek & Lucie Tomanova, 2014. "Is the Region of Visegrad Countries on the Track to the Euro Area? Recent Evidence from the Real Convergence Perspective," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 130-139.
    12. Ryszard Rapacki & Mariusz Próchniak, 2014. "The Impact of EU Membership on Economic Growth and Real Convergence of the Central and Eastern European Countries," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 39.
    13. Hirsch, Julia & Walz, Uwe, 2019. "The financing dynamics of newly founded firms," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 261-272.
    14. Wei, Yu & Cao, Yang, 2017. "Forecasting house prices using dynamic model averaging approach: Evidence from China," Economic Modelling, Elsevier, vol. 61(C), pages 147-155.
    15. Mariusz Prochniak & Katarzyna Wasiak, 2017. "The impact of the financial system on economic growth in the context of the global crisis: empirical evidence for the EU and OECD countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(2), pages 295-337, May.
    16. Forson, Joseph Ato & Opoku, Rosemary Afrakomah & Peng, Zhen, 2017. "Innovation, Institutions and Economic Growth in Sub-Sahara Africa – an IV Estimation of a Panel Threshold Model," MPRA Paper 103063, University Library of Munich, Germany, revised 15 Mar 2018.
    17. Mindaugas Butkus & Diana Cibulskiene & Alma Maciulyte-Sniukiene & Kristina Matuzeviciute, 2018. "What Is the Evolution of Convergence in the EU? Decomposing EU Disparities up to NUTS 3 Level," Sustainability, MDPI, Open Access Journal, vol. 10(5), pages 1-1, May.
    18. Castillo-Manzano, José I. & Castro-Nuño, Mercedes & Pedregal, Diego J., 2014. "The trend towards convergence in road accident fatality rates in Europe: The contributions of non-economic variables," Transport Policy, Elsevier, vol. 35(C), pages 229-240.
    19. Mariusz Próchniak & Bartosz Witkowski, 2013. "The analysis of the impact of regulatory environment on the pace of economic growth of the world countries according to the Bayesian Model Averaging," NBP Working Papers 165, Narodowy Bank Polski, Economic Research Department.
    20. Piotr Białowolski & Tomasz Kuszewski & Bartosz Witkowski, 2014. "Bayesian averaging of classical estimates in forecasting macroeconomic indicators with application of business survey data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(1), pages 53-68, February.

    More about this item

    Keywords

    Convergence; Economic growth; Growth factors; Bayesian averaging; EU countries;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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