IDEAS home Printed from https://ideas.repec.org/p/ltv/dpaper/201101.html

The Convergence Processes in Europe and Latvia

Author

Listed:
  • Aleksejs Melihovs

    (Bank of Latvia)

  • Igors Kasjanovs

    (Bank of Latvia)

Abstract

This paper, attempting to tackle separately real and structural convergence, is an in-depth study of the convergence processes in Latvia and Europe. Latvia's structural convergence towards both the EU and other neighbouring (Baltic) countries is estimated using the Krugman index. Real convergence processes in the EU, distinguishing between ? convergence and beta convergence, are likewise studied. In addition, cluster analysis with grouping European countries by their structural features is conducted. In this study, the current beta convergence and sigma convergence processes within the EU are identified, yet an in-depth study disclosed that it was mostly the EU12 countries that were the convergence process drivers, with convergence at the regional level well behind that at the national level. The convergence among the EU Member States primarily depended on the wealthier regions of countries becoming richer (characteristic of EU12 in particular), with the process proceeding at a faster pace in relatively poorer countries. This suggests that within a country the discrepancies between rich and poor regions intensify over time. That leads to a conclusion that the European regional policy aimed at decreasing regional income heterogeneity did not prove efficient in the reference period. Structural convergence in Latvia was mainly observed in 2008 and 2009, i.e. the years of real divergence enhanced by the onset of the crisis. Structural convergence in the breakdown of gross value added was mainly driven by the fluctuations of the value added ratio of trade, tourism and transport, manufacturing and construction sector. The conducted cluster analysis demonstrates that over time European countries have become more homogenous or mutually similar in terms of economic structure. A particular focus on the specific economic characteristics of countries leads to a different conclusion: the countries in Europe agglomerated into several specific groups, thus clearly outlining the different drivers of growth in the post-crisis period.

Suggested Citation

  • Aleksejs Melihovs & Igors Kasjanovs, 2011. "The Convergence Processes in Europe and Latvia," Discussion Papers 2011/01, Latvijas Banka.
    • Handle: RePEc:ltv:dpaper:201101
    as

    Download full text from publisher

    File URL: https://www.bank.lv/images/stories/pielikumi/publikacijas/petijumi/DM_eng_1_2011_kasjanovs_melihovs.pdf
    Download Restriction: no
    File URL: https://www.macroeconomics.lv/sites/default/files/dm_eng_1_2011_kasjanovs_melihovs_0.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:ezo:ezppap:wp15 is not listed on IDEAS
    2. Iancu, Aurel, 2009. "Real Economic Convergence," Working Papers of National Institute for Economic Research 090104, Institutul National de Cercetari Economice (INCE).
    3. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    4. Young, Andrew T. & Higgins, Matthew J. & Levy, Daniel, 2008. "Sigma Convergence versus Beta Convergence: Evidence from U.S. County-Level Data," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 40(5), pages 1083-1093.
    5. Christian Longhi & Antonio Musolesi, 2007. "European cities in the process of economic integration: towards structural convergence," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(2), pages 499-499, June.
    6. Egger, Hartmut & Egger, Peter & Greenaway, David, 2007. "Intra-industry trade with multinational firms," European Economic Review, Elsevier, vol. 51(8), pages 1959-1984, November.
    7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    8. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
    9. Carmela Martin & Francisco J. Velazquez & Bernard Funck, 2001. "European Integration and Income Convergence : Lessons for Central and Eastern European Countries," World Bank Publications - Books, The World Bank Group, number 13968, April.
    10. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
    11. Charles I. Jones, 1997. "On the Evolution of the World Income Distribution," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 19-36, Summer.
    12. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Economic Convergence and Economic Policies," NBER Working Papers 5039, National Bureau of Economic Research, Inc.
    13. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
    14. 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.
    15. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    16. Cuadrado-Roura, Juan R. & Mancha Navarro, Tomas & Garrido Yserte, Ruben, 1999. "Real versus virtual growth: An Analysis of regional Dynamics," ERSA conference papers ersa99pa195, European Regional Science Association.
    17. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    18. Karl Aiginger, 2000. "Specialisation of European Manufacturing," Austrian Economic Quarterly, WIFO, vol. 5(2), pages 81-92, May.
    19. Bernard G. Funck & Lodovico Pizzati, 2003. "European Integration, Regional Policy, and Growth," World Bank Publications - Books, The World Bank Group, number 15144, April.
    20. Paolo Guerrieri & Simona Iammarino, 2007. "Dynamics of Export Specialization in the Regions of the Italian Mezzogiorno: Persistence and Change," Regional Studies, Taylor & Francis Journals, vol. 41(7), pages 933-948.
    21. Palan, Nicole & Schmiedeberg, Claudia, 2010. "Structural convergence of European countries," Structural Change and Economic Dynamics, Elsevier, vol. 21(2), pages 85-100, May.
    22. Gugler Klaus & Pfaffermayr Michael, 2004. "Convergence in Structure and Productivity in European Manufacturing?," German Economic Review, De Gruyter, vol. 5(1), pages 61-79, February.
    23. Ann Bartel & Casey Ichniowski & Kathryn Shaw, 2007. "How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement, and Worker Skills," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1721-1758.
    24. Dowrick, Steve & Nguyen, Duc-Tho, 1989. "OECD Comparative Economic Growth 1950-85: Catch-Up and Convergence," American Economic Review, American Economic Association, vol. 79(5), pages 1010-1030, December.
    25. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 233-240.
    26. Sassi, Maria, 2007. "Structural Change And Economic Convergence Across The Eu-15 Regions: Can The Agricultural Sector Play a Role?," 81st Annual Conference, April 2-4, 2007, Reading University, UK 7961, Agricultural Economics Society.
    27. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    28. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-2132, December.
    29. repec:got:cegedp:75 is not listed on IDEAS
    30. Andrea Ingianni & Václav Žd’árek, 2009. "Real Convergence in the New Member States: Myth or Reality?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 294-320.
    31. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    32. Martins Bitans & Egils Kauzens, 2004. "Impact of the Euro Adoption on the Economy of Latvia," Working Papers 2004/02, Latvijas Banka.
    33. Ulrike Stierle-von Schütz & Michael H. Stierle & Frederic B. Jennings Jr & Adrian T.H. Kuah (ed.), 2008. "Regional Economic Policy in Europe," Books, Edward Elgar Publishing, number 13227, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Catalina MOTOFEI, 2017. "Sectorial evolutions in former communist economies, current EU members," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 15(146), pages 266-266.
    2. Smirnykh, Larisa & Woergoetter, Andreas, 2021. "Regional convergence in CEE before and after the Global Financial Crisis," IHS Working Paper Series 33, Institute for Advanced Studies.
    3. Alexoaei Alina Petronela & Robu Raluca Georgiana, 2018. "A theoretical review on the structural convergence issue and the relation to economic development in integration areas," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 12(1), pages 34-44, May.
    4. Mihnenoka Aleksandra & Senfelde Maija, 2017. "the impact of national economy structural transformation on regional employment and income: the case of Latvia," South East European Journal of Economics and Business, Sciendo, vol. 12(2), pages 47-60, December.

    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. Hibbs Jr, Douglas A., 2001. "The Politicization of Growth Theory," Working Papers in Economics 37, University of Gothenburg, Department of Economics.
    2. Pozzolo, Alberto Franco, 2004. "Endogenous Growth in Open Economies - A Survey of Major Results," Economics & Statistics Discussion Papers esdp04020, University of Molise, Department of Economics.
    3. ?gel de la Fuente, "undated". "Convergence Across Countries And Regions: Theory And Empirics," UFAE and IAE Working Papers 447.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    4. Paul Johnson & Chris Papageorgiou, 2020. "What Remains of Cross-Country Convergence?," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 129-175, March.
    5. Alexoaei Alina Petronela & Robu Raluca Georgiana, 2018. "A theoretical review on the structural convergence issue and the relation to economic development in integration areas," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 12(1), pages 34-44, May.
    6. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    7. Alberto Franco Pozzolo, 2004. "Endogenous growth in open economies: a surveys," Temi di discussione (Economic working papers) 527, Bank of Italy, Economic Research and International Relations Area.
    8. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308, Elsevier.
    9. Iancu, Aurel, 2009. "Real Economic Convergence," Working Papers of National Institute for Economic Research 090104, Institutul National de Cercetari Economice (INCE).
    10. Stilianos Alexiadis & Alexandros Alexandrakis, 2008. "Threshold Conditions and Regional Convergence in European Agriculture," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 1(2), pages 13-37, December.
    11. Lin, Justin Yifu & Monga, Celestin, 2010. "The growth report and new structural economics," Policy Research Working Paper Series 5336, The World Bank.
    12. Gyawali, Buddhi Raj & Fraser, Rory & Banerjee, Ban & Bukenya, James O., 2009. "Income Convergence and Growth in Alabama: Evidence from Sub-county Level Data," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46713, Southern Agricultural Economics Association.
    13. Seethepalli, Kalpana & Bramati, Maria Caterina & Veredas, David, 2008. "How relevant is infrastructure to growth in East Asia ?," Policy Research Working Paper Series 4597, The World Bank.
    14. Magrini, Stefano, 1999. "The evolution of income disparities among the regions of the European Union," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 257-281, March.
    15. Roberto Ezcurra, 2001. "Convergencia Y Cambio Estructural En La Unión Europea," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0111, Departamento de Economía - Universidad Pública de Navarra.
    16. Rosa Bernardini Papalia & Silvia Bertarelli, 2010. "Evaluating Total Factor Productivity Differences by a Mapping Structure in Growth Models," International Regional Science Review, , vol. 33(1), pages 31-59, January.
    17. Octavio Fernández-Amador & Doris A. Oberdabernig & Patrick Tomberger, 2019. "Testing for Convergence in Carbon Dioxide Emissions Using a Bayesian Robust Structural Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1265-1286, August.
    18. Leone Leonida & Daniel Montolio, 2001. "Convergence and Inter-Distributional Dynamics among the Spanish Provinces. A Non-parametric Density Estimation Approach," Working Papers 2001/7, Institut d'Economia de Barcelona (IEB).
    19. Jan Ditzen, 2014. "Economic Growth and Migration," SEEC Discussion Papers 1406, Spatial Economics and Econometrics Centre, Heriot Watt University.
    20. de la Fuente, Angel, 1997. "The empirics of growth and convergence: A selective review," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 23-73, January.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

    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:ltv:dpaper:201101. 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: Konstantins Benkovskis (email available below). General contact details of provider: https://edirc.repec.org/data/bolgvlv.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.