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Integration and Conditional Convergence in the Enlarged EU Area

  • Kaitila, Ville

This working paper analyses conditional convergence in Europe and also tries to assess the impact that arises from integration. Using a pooled mean-group estimation method, we first analyse the conditional convergence of GDP per labour force in the area covering the 15 member states of the European Union (EU-15) in 1960-2002. Conditional convergence is well-documented for the EU-15. Higher investment, lower public consumption and lower inflation have contributed positively to GDP growth. Deeper European integration is shown to have accelerated growth when inflation is not included in the specification, but not otherwise. The evidence on the effect of integration on growth is therefore mixed. We then apply the same method to estimate the growth of GDP per labour force in the new EU member states – the eight Central and Eastern European countries (CEECs) – for the period 1993-2002. These countries are shown to have converged conditionally towards the average level of GDP per labour force in the EU-15. Higher investment and lower public consumption have also supported growth in the CEECs.

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Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 935.

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Length: 17 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:rif:dpaper:935
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  1. Ville Kaitila, 2004. "Convergence of real GDP per capita in the EU15. How do the Accession Countries fit in?," Economics Working Papers 025, European Network of Economic Policy Research Institutes.
  2. Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
  3. Miller, Stephen M. & Upadhyay, Mukti P., 2002. "Total factor productivity and the convergence hypothesis," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 267-286, June.
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  7. Dan Ben-David & Ayal Kimhi, 2000. "Trade and the Rate of Income Convergence," NBER Working Papers 7642, National Bureau of Economic Research, Inc.
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  19. repec:dgr:uvatin:20020096 is not listed on IDEAS
  20. Guillaume Gaulier, 2003. "Trade and Convergence: Revisiting Ben-David," Working Papers 2003-06, CEPII research center.
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  23. Kaitila, Ville, 2003. "Convergence of Real GDP per Capita in the EU15 area: How do the Accession Countries Fit in ?," Discussion Papers 865, The Research Institute of the Finnish Economy.
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