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Convergence, income distribution, and the economic crisis in Europe

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  • Kaitila, Ville

Abstract

We analyse the Sigma convergence (standard deviation divided by average) of purchasing power adjusted GDP per capita and GDP per hour worked in the European Union. We also link the development in income distribution as measured by Gini coefficients to convergence. With short pauses, there has been a long term trend of GDP per capita convergence in the European Union after 1960. The Great Recession was a shock to the development, and convergence within the EU-15 has suffered considerably. The largest relative declines have occurred in Cyprus, Greece, Italy, Portugal and Spain. On the other hand, the ex-transition countries have mostly continued their catching up. Historically, convergence in the EU has been faster when aggregate GDP growth has been faster. We also find that income disparities measured by Gini coefficients are negatively related to GDP per capita levels. Convergence was not correlated with changes in income distribution in 2000–2011 except for a group of six catching-up countries where we find a positive relation. We also find that there has occurred Sigma convergence in national Gini coefficients

Suggested Citation

  • Kaitila, Ville, 2013. "Convergence, income distribution, and the economic crisis in Europe," ETLA Working Papers 14, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:wpaper:14
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    References listed on IDEAS

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    1. Peter C. B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Econometrica, Econometric Society, vol. 75(6), pages 1771-1855, November.
    2. Laurent Cavenaile & David Dubois, 2011. "An empirical analysis of income convergence in the European Union," Applied Economics Letters, Taylor & Francis Journals, vol. 18(17), pages 1705-1708.
    3. Kaitila, Ville, 2004. "Integration and Conditional Convergence in the Enlarged EU Area," Discussion Papers 935, The Research Institute of the Finnish Economy.
    4. Ulrich Fritsche & Vladimir Kuzin, 2011. "Analysing convergence in Europe using the non-linear single factor model," Empirical Economics, Springer, vol. 41(2), pages 343-369, October.
    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.
    6. Borut Vojinovic & Zan Oplotnik & Mariusz Prochniak, 2010. "EU enlargement and real economic convergence," Post-Communist Economies, Taylor & Francis Journals, vol. 22(3), pages 303-322.
    7. Evangelia Desli, 2009. "Convergence and efficiency: evidence from the EU-15," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(3), pages 403-430, April.
    8. Tuomas Malinen, 2012. "Estimating the long-run relationship between income inequality and economic development," Empirical Economics, Springer, vol. 42(1), pages 209-233, February.
    9. Nicholas Apergis & Ekaterini Panopoulou & Chris Tsoumas, 2010. "Old Wine in a New Bottle: Growth Convergence Dynamics in the EU," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(2), pages 169-181, June.
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    Cited by:

    1. repec:cpn:umkdem:v:17:y:2017:p:59-80 is not listed on IDEAS
    2. repec:cbu:jrnlec:y:2017:v:2:p:15-25 is not listed on IDEAS

    More about this item

    Keywords

    EU; GDP per capita; productivity; Sigma convergence; Gini coefficient;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • 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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