O57 - Comparative Studies of CountriesReturn

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.

With advancement of the European integration process, income convergence has become a debated topic that has challenged both the academic forums andthe decision-makers’ community. With the first waves of the EU enlargement, it has become indisputable for the European leaders that in order to ensure economic and political stability, the European Union has to promote convergence between countries and regions. The main purpose of this paper is to study income convergence in the European Union by taking into consideration both the national and regional dimensions. In this respect, we have examined (absolute) β- and         σ-convergence between 2000 and 2018, finding evidences in favour of the neoclassical growth model assumptions. The results of our study confirm the β-convergence hypothesis as the poorer countries and regions from Central and Eastern Europe experienced higher growth rates than the developed ones. In the second part of our paper, we have tried to examine the key drivers of economic growth in the European Union (conditional β-convergence). Our study suggests that variables such as gross fixed capital formation, real labour productivity and labour force participation rate had a positive impact on convergence. In contrast, the growth rates in the European Union were hampered by over-indebtedness, high rates of inflation and unemployment. These internal vulnerabilities together with external challenges threaten the stability and prosperity of the European continent. Consequently, the European Union needs more than ever to reconsider its growth model in order to ensure long-term convergence and to avoid the polarisation between its Members.