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This paper evaluates income convergence in the European Union, between “old” (EU15) and “new” member states from Central and East Europe (CEE10), and among the countries within these two groups. The GDP per capita convergence should be expected according to the exogenous economic growth model and neoclassical trade theory. The presence of σ-convergence and both absolute and conditional β-convergence is tested for on a sample of 25 European Union countries (EU25). Results confirm the existence of β-convergence of GDP per capita at purchasing power parity among EU25, but not among EU15 and CEE10 countries. σ-convergence has been confirmed among EU25 and CEE10 countries, while GDP per capita has been diverging in the EU15 group of countries. Moreover, the results reveal that recent economic crisis has reversed long-term tendencies and led to income convergence within EU15 and divergence within CEE10. During the crisis, the income differences among the EU25 countries have increased, but the scope and duration of this effect has been limited and has not affected the long term convergence path. However, the obtained long term speed of convergence is significantly lower compared with the previous researches.

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Acta Oeconomica
Authors: Mirjana Gligorić Matić, Biljana Jovanović Gavrilović, and Nenad Stanišić

Abstract

After Second World War (WWII) a true evolution in understanding of economic development happened, which affected the ways of measuring prosperity, i.e. perceiving changes in people’s welfare. Numerous indicators have been created, which go ‘beyond GDP’ and cover different aspects of development and well-being. The aim of this paper is to analyse prosperity convergence in 32 European countries with a composite indicator – Legatum Prosperity Index (LPI). LPI is more complete than other indicators used in convergence analysis and reflects multidimensional nature of modern development and prosperity. Our research of absolute beta convergence is based on cross-sectional and panel data. Results indicate the existence of convergence in the overall index and its constitutive parts – dimensions and pillars, with different convergence speed regarding LPI and its segments for the total sample of countries, as well as for the countries of Eastern and Western Europe.

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