Real Convergence and European Integration with Focus on the New Member States

Ovidiu Stoica, Angela Roman, Delia-Elena Diaconaşu

Abstract


Our paper aims to analyse the dynamics of real economic convergence and the impact of several macroeconomic and institutional factors on this process, within the EU countries for the period 1995-2018. Employing cross-sectional and panel data techniques, this paper examines both the level and dynamics of absolute and conditional convergence within the EU28 countries and identifies key drivers of economic growth within the EU28 and subsequent groups (the EU15 versus New EU Member States group), by taking into consideration the impact of the recent global economic crisis. We find that the real convergence process is quite uneven and unstable over the 1995-2018 period. Our results confirm the negative effects of the recent global economic crisis on per capita GDP growth, suggesting a weakening of the convergence process at the EU28 level, especially at the level of New EU Member States. In addition, we find that investment, the openness of the economy and the quality of the institutional framework represent the main drivers of real convergence within the EU countries.



Keywords


European integration; beta convergence; conditional convergence; economic growth; financial crisis.

JEL Codes


F43; F45; C33.

Full Text:

PDF

References


Acemoglu, D., Johnson, S., and Robinson, J., 2004. Institutions as the fundamental cause of long-run growth. NBER Working Paper, 10481. Cambridge, MA: National Bureau of Economic Research. http://dx.doi.org/10.3386/w10481

Alcidi, C., Núñez Ferrer, J., Di Salvo, M., Pilati, M., and Musmeci, R., 2018. Income Convergence in the EU: A Tale of Two Speeds. CEPS Commentary. http://aei.pitt.edu/93160/1/ConvergencePDF.pdf.

Barro, R. J., 1991. Economic growth in a cross section of countries. The Quarterly Journal of Economics, 106(2), 407-443. http://dx.doi.org/10.2307/2937943

Bongardt, A., Torres, F., Hefeker, C., Wunsch, P., and Hermann, C., 2013. Convergence in the EU. Intereconomics, 48(2), 72-92. http://dx.doi.org/10.1007/s10272-013-0448-9

Borsi, M. T., and Metiu, N., 2015. The evolution of economic convergence in the European Union. Empirical Economics, 48(2), 657-681. http://dx.doi.org/10.1007/s00181-014-0801-2

Borys, M. M., Polgár, É. K., and Zlate, A., 2008. Real convergence and the determinants of growth in EU candidate and potential candidate countries - a panel data approach. ECB Occasional Paper, 86. https://www.econstor.eu/handle/10419/154539.

Cavenaile, L., and Dubois, D., 2011. An Empirical Analysis of Income Convergence in the European Union. Applied Economics Letters, 18(17), 1705-1708. http://dx.doi.org/10.1080/13504851.2011.560104

Crespo Cuaresma, J., Oberhofer, H., Smits, K., and Vincelette, G. A., 2012. Drivers of convergence in eleven Eastern European countries. Policy Research Working Paper. https://epub.wu.ac.at/5522/1/wps6185.pdf.

Crespo Cuaresma, J., Ritzberger-Grunwald, D., and Silgoner, M. A., 2008. Growth, Convergence and EU Membership. Applied Economics, 40(5), 643-656. http://dx.doi.org/10.1080/00036840600749524

Diaz del Hoyo, J. L., Ettore, D., Frigyes Ferdinand, H., and Sona, M., 2017. Real convergence in the euro area: A long-term perspective. ECB Occasional Paper, 203. http://bit.do/fnitm. http://dx.doi.org/10.2866/121513

Dobrinsky, R., and Havlik, P., 2014. Economic Convergence and Structural Change: the Role of Transition and EU Accession. Wiiw Research Report, 395. http://bit.do/fndbG.

Ertan Ozguzer, G., and Ogus-Binatli, A., 2016. Economic Convergence in the EU: A Complexity Approach. Eastern European Economics, 54(2), 93-108. http://dx.doi.org/10.1080/00128775.2015.1126787

European Central Bank, 2015. Real Convergence in the Euro Area: Evidence, Theory and Policy Implications. ECB Economic Bulletin, 5, 30–45. http://bit.do/fndb3.

Fare, R., Grosskopf, S., and Margaritis, D., 2006. Productivity growth and convergence in the European Union. Journal of Productivity Analysis, 25(1), 111-141. http://dx.doi.org/10.1007/s11123-006-7134-x

Glodowska, A., and Pera, B., 2019. On the Relationship between Economic Integration, Business Environment and Real Convergence: The Experience of the CEE Countries. Economies, 7(54), 1-19. http://dx.doi.org/10.3390/economies7020054

Halmai, P., and Vasary, V., 2010. Real Convergence in the New Member States of the European Union (Shorter and Longer Term Prospects). European Journal of Comparative Economics, 7(1), 229-253.

Halmai, P., and Vasary, V., 2012. Convergence Crisis: Economic Crisis and Convergence in the European Union. International Economics and Economic Policy, 9(3-4), 297-322. http://dx.doi.org/10.1007/s10368-012-0218-3

Koopmans, T. C., 1963. On the Concept of Optimal Economic Growth. Cowles Foundation Discussion Papers, 163. http://bit.do/fndcF.

Lane, D., 2007. Post-Communist States and the European Union. Journal of Communist Studies and Transition Politics, 23(4), 461-477. http://dx.doi.org/10.1080/13523270701674558

Law, S. H., and Singh, N., 2014. Does too much finance harm economic growth? Journal of Banking & Finance, 41, 36-44. http://dx.doi.org/10.1016/j.jbankfin.2013.12.020

Marelli, E., and Signorelli, M., 2010. Institutional, Nominal and Real Convergence in Europe. Banks and Bank Systems, 5(2-1), 140-155.

Masuch, K., Moshammer, E., and Pierluigi, B., 2016. Institutions and growth in Europe. CEPS Working Document, 421. http://bit.do/fnddn.

Matkowski, Z., and Prochniak, M., 2007. Economic Convergence between the CEE-8 and the European Union. Eastern European Economics, 45(1), 59-76. http://dx.doi.org/10.2753/EEE0012-8775450103

Mihaljek, D., 2018. Convergence in Central and Eastern Europe: Can All Get to EU Average? Comparative Economic Studies, 60(2), 217-229. http://dx.doi.org/10.1057/s41294-018-0063-7

Monfort, M., Cuestas, J. C., and Ordóñez, J., 2013. Real convergence in Europe: A cluster analysis. Economic Modelling, 33, 689-694. http://dx.doi.org/10.1016/j.econmod.2013.05.015

Nenovsky, N., and Tochkov, K., 2014. Transition, Integration and Catching Up: Income Convergence between Central and Eastern Europe and the European Union. Mondes en Developpement, 42(167), 73-92. http://dx.doi.org/10.3917/med.167.0073

Prochniak, M., 2011. Determinants of economic growth in Central and Eastern Europe: The global crisis perspective. Post-Communist Economies, 23(4), 449-468. http://dx.doi.org/10.1080/14631377.2011.622566

Ramsey, F. P., 1928. A Mathematical Theory of Saving. Economic Journal (London), 38(152), 543-559. http://dx.doi.org/10.2307/2224098

Rapacki, R., and Prochniak, M., 2009. Real Beta and Sigma Convergence in 27 Transition Countries, 1990-2005. Post-Communist Economies, 21(3), 307-326. http://dx.doi.org/10.1080/14631370903090616

Rapacki, R., and Prochniak, M., 2019. EU membership and economic growth: Empirical evidence for the CEE countries. European Journal of Comparative Economics, 16(1), 3-40. http://dx.doi.org/10.25428/1824-2979/201901-3-40

Siljak, D., 2015. Real Economic Convergence in the European Union from 1995 to 2013. Business and Management Review, 6(4), 213-225.

Siljak, D., and Nagy, G., 2018. Economic Convergence of the Eastern Partnership Countries towards the EU-13. Eastern Journal of European Studies, 9(2), 169-185.

Solow, R. M., 1956. A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65-94. http://dx.doi.org/10.2307/1884513

Strielkowski, W., and Hoschle, F., 2016. Evidence for Economic Convergence in the EU: The Analysis of Past EU Enlargements. Technological and Economic Development of Economy, 22(4), 617-630. http://dx.doi.org/10.3846/20294913.2014.890138

Szeles, M. R., and Marinescu, N., 2010. Real Convergence in the CEECs, Euro Area Accession and the Role of Romania. Eastern Journal of European Studies, 7(1), 181-202.

Vojinovic, B., Oplotnik, Z. J., and Prochniak, M., 2010. EU Enlargement and Real Economic Convergence. Post-Communist Economies, 22(3), 303-322. http://dx.doi.org/10.1080/14631377.2010.498681

Yin, L., Zestos, G. K., and Michelis, L., 2003. Economic Convergence in the European Union. Journal of Economic Integration, 18(1), 188-213. http://dx.doi.org/10.11130/jei.2003.18.1.188

Żuk, P., and Savelin, L., 2018. Real convergence in central, eastern and south-eastern Europe. ECB Occasional Paper Series, 212. http://bit.do/fnddM.




DOI: http://dx.doi.org/10.47743/saeb-2019-0035

Refbacks

  • There are currently no refbacks.