IDEAS home Printed from https://ideas.repec.org/a/prg/jnlefa/v2021y2021i2id254p29-50.html
   My bibliography  Save this article

Real Convergence in the European Union. Bridging the Gap between the New and Old Member States

Author

Listed:
  • Ana-Maria Holobiuc

Abstract

One of the fundamental pillars of the European Union aims at the convergence of economic performances among its Member States. This objective has become increasingly challenging with the advancement of the integration process from the customs union to the economic and monetary union, from the six founding Members to twenty-seven European states. The aim of this paper is to study real convergence in the European Union between 2000 and 2019 and conducting also a comparative analysis between the New and the Old Members. The methodological tools imply absolute and conditional β- and σ-convergence. By using cross-sectional regressions, we have found evidence in favour of the absolute β-convergence hypothesis, as the initially poorer Members experienced higher GDP per capita growth rates than the developed economies. The average catching-up speed in the European Union was 2.5%, while the Central and Eastern Members experienced a higher convergence rate, which reached 3.6%. Moreover, by applying panel regressions, we have found evidence supporting the conditional convergence hypothesis, the study emphasising the role of macroeconomic, social, and governance-related variables in promoting economic growth. Our research suggests that investment and trade had a major role in enhancing economic growth both at the aggregate and subgroup level. Finally, the paper illustrates that β-convergence was accompanied by a reduction of disparities within the European Union. However, the global financial crisis hampered the convergence process among the Old Members. The paper suggests that although the Central and Eastern European countries made important progress in terms of catching-up, convergence of economic performance in the European Union has not been reached so far. By contrast, the modest growth rates and the exacerbation of income differentials between the Old Members might call into question the perspective to achieve this objective in the short term.

Suggested Citation

  • Ana-Maria Holobiuc, 2021. "Real Convergence in the European Union. Bridging the Gap between the New and Old Member States," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2021(2), pages 29-50.
    • Handle: RePEc:prg:jnlefa:v:2021:y:2021:i:2:id:254:p:29-50
    DOI: 10.18267/j.efaj.254
    as

    Download full text from publisher

    File URL: http://efaj.vse.cz/doi/10.18267/j.efaj.254.html
    Download Restriction: free of charge
    File URL: http://efaj.vse.cz/doi/10.18267/j.efaj.254.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.18267/j.efaj.254?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rumen Dobrinsky & Peter Havlik, 2014. "Economic Convergence and Structural Change: the Role of Transition and EU Accession," wiiw Research Reports 395, The Vienna Institute for International Economic Studies, wiiw.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    4. Robert J. Barro, 2012. "Convergence and Modernization Revisited," NBER Working Papers 18295, National Bureau of Economic Research, Inc.
    5. Ryszard Rapacki & Mariusz Próchniak, 2009. "The EU enlargement and economic growth in the CEE new member countries," European Economy - Economic Papers 2008 - 2015 367, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Vojinović, Borut & Acharya, Sanjaya & Próchniak, Mariusz, 2009. "Convergence Analysis Among the Ten European Transition Economies," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 50(2), pages 17-35, December.
    7. Rumen Dobrinsky, 2013. "What is Happening to Growth in Europe?," wiiw Research Reports 385, The Vienna Institute for International Economic Studies, wiiw.
    8. Romer, Paul M., 1990. "Human capital and growth: Theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 251-286, January.
    9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Åsa Johansson, 2016. "Public Finance, Economic Growth and Inequality: A Survey of the Evidence," OECD Economics Department Working Papers 1346, OECD Publishing.
    2. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    3. Fernandes, Leonardo H.S. & de Araújo, Fernando H.A. & Silva, Igor E.M. & Neto, Jusie S.P., 2021. "Macroeconophysics indicator of economic efficiency," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).
    4. Jieun Lee, 2022. "Evidence and Strategy on Economic Distance in Spatially Augmented Solow-Swan Growth Model," Papers 2209.05562, arXiv.org.
    5. Amavilah, Voxi Heinrich, 2018. "Endogenous constraints, coefficients of economic distance, and economic performance of African countries – An exploratory essay," MPRA Paper 90065, University Library of Munich, Germany.
    6. Rubinstein, A., 2022. "Creative economy of the paternalistic state: What does the coming day hold for us?," Journal of the New Economic Association, New Economic Association, vol. 54(2), pages 209-212.
    7. Ana-Maria Holobiuc, 2020. "Real Convergence in the European Union: An Empirical Approach," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 126-133, December.
    8. Doré, Natalia I. & Teixeira, Aurora A.C., 2023. "The role of human capital, structural change, and institutional quality on Brazil's economic growth over the last two hundred years (1822–2019)," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 1-12.
    9. Ana-Maria Holobiuc, 2020. "Income Convergence in the European Union: National and Regional Dimensions," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2020(2), pages 45-65.
    10. Mahmud, Hassan, 2008. "Why has Growth slowed in Sub-Saharan Africa: A System GMM-IV Approach," MPRA Paper 25910, University Library of Munich, Germany.
    11. Justyna Supińska, 2013. "Does human factor matter for economic growth? Determinants of economic growth process in CEE countries in light of spatial theory," Bank i Kredyt, Narodowy Bank Polski, vol. 44(5), pages 505-532.
    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. Cieślik, Andrzej & Wciślik, Dominika Róża, 2020. "Convergence among the CEE-8 economies and their catch-up towards the EU-15," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 39-48.
    14. Dzenita SILJAK & Sándor Gyula NAGY, 2018. "Economic convergence of the Eastern Partnership countries towards the EU-13," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 9, pages 169-185, December.
    15. Amavilah, Voxi Heinrich, 2014. "Knowledge = Technology + Human Capital and the Lucas and Romer Production Functions," MPRA Paper 58847, University Library of Munich, Germany.
    16. Kawalec Paweł, 2020. "The dynamics of theories of economic growth: An impact of Unified Growth Theory," Economics and Business Review, Sciendo, vol. 6(2), pages 19-44, June.
    17. Kar, Sabyasachi & Pritchett, Lant & Raihan, Selim & Sen, Kunal, 2013. "Looking for a break: Identifying transitions in growth regimes," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 151-166.
    18. van de Klundert, T.C.M.J. & Smulders, J.A., 1991. "Reconstructing growth theory : A survey," Other publications TiSEM 19355c51-17eb-4d5d-aa66-b, Tilburg University, School of Economics and Management.
    19. Matthias Firgo & Peter Mayerhofer, 2015. "Wissens-Spillovers und regionale Entwicklung - welche strukturpolitische Ausrichtung optimiert des Wachstum?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 144, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    20. George Halkos & Iacovos Psarianos, 2016. "Exploring the effect of including the environment in the neoclassical growth model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(3), pages 339-358, July.

    More about this item

    Keywords

    European Union; Real Convergence; Central and Eastern Europe; β; -convergence; σ;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlefa:v:2021:y:2021:i:2:id:254:p:29-50. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stanislav Vojir (email available below). General contact details of provider: https://edirc.repec.org/data/uevsecz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.