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Sustainability of Income Convergence in the European Union: Two Downturns—Two Different Stories

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  • Barbara Batóg

    (Institute of Economics and Finance, University of Szczecin, 70-453 Szczecin, Poland)

  • Jacek Batóg

    (Institute of Economics and Finance, University of Szczecin, 70-453 Szczecin, Poland)

Abstract

The aim of this paper is to apply the concept of marginal vertical income convergence to analyze the influence of the two last economic downturns (2007 and 2020) on the sustainability of the equalization of income levels within the European Union. The methodology used enables us to avoid some restrictions of the classical analysis of income convergence. Income convergence models were estimated using data from the period 1993–2022, excluding the impact of outliers. The results confirm that we can observe the progressive process of the absolute income convergence for EU members, but there are significant differences between countries’ contributions to the process. These differences are caused by different paths of economic growth, and different mean resilience to economic crises, as well as different patterns of income inequalities. Their proper recognition allows us to develop efficient policies aimed at social cohesion, reducing income inequalities (the 10th Sustainable Development Goal), and sustainable economic development. Additionally, the estimated models indicated a definite different impact of the last two economic shocks on the European process of income convergence. The first shock significantly slowed down the income convergence process, while the second one was practically neutral in this context.

Suggested Citation

  • Barbara Batóg & Jacek Batóg, 2024. "Sustainability of Income Convergence in the European Union: Two Downturns—Two Different Stories," Sustainability, MDPI, vol. 16(3), pages 1-16, February.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:3:p:1339-:d:1333733
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    References listed on IDEAS

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    1. Péter Halmai, 2021. "COVID-crisis and economic growth: Tendencies on potential growth in the European Union," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 71(supplemen), pages 165-186, November.
    2. Silvia Merler, 2016. "Income convergence during the crisis- did EU funds provide a buffer?," Bruegel Working Papers 17081, Bruegel.
    3. Matkowski, Zbigniew & Prochniak, Mariusz & Rapacki, Ryszard, 2016. "Real Income Convergence between Central Eastern and Western Europe: Past, Present, and Prospects," EconStor Conference Papers 146992, ZBW - Leibniz Information Centre for Economics.
    4. Borio, Claudio, 2014. "The financial cycle and macroeconomics: What have we learnt?," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 182-198.
    5. Péter Halmai & Viktória Vásáry, 2012. "Convergence crisis: economic crisis and convergence in the European Union," International Economics and Economic Policy, Springer, vol. 9(3), pages 297-322, September.
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