European Integration, Productivity Growth and Real Convergence

Kutan, Ali M.; Yigit, Taner M.

doi:10.2139/ssrn.547842

Cited by 14 publications

(16 citation statements)

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“…In a corresponding work, Brada et al (2005) present mixed evidence on monetary and real output convergence of the CEEC to the euro area between 1980-2000 and conclude that the benefits of EMU accession are yet limited. In contrast, Kutan and Yigit (2007) study productivity growth and real convergence in the EU over the period 1980-2004 and conclude that economic integration is beneficial for both the founding and the new members in the long run.…”

Section: Related Literaturementioning

confidence: 96%

The evolution of economic convergence in the European Union

2014

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Reproduction permitted only if source is stated.ISBN 978-3-86558-941-5 (Printversion) Non-technical summary Western European countries took major steps toward economic integration in recent decades, including the liberalization of capital and labor markets and the foundation of the European Economic and Monetary Union (EMU). The 1992 Maastricht Treaty set an agenda for macroeconomic convergence prior to entering the monetary union, and the European Commission has put forward numerous policy initiatives aimed at the reduction of regional economic disparities and improving competitiveness among EU members. Meanwhile, in Central and Eastern European countries (CEEC) important political and institutional changes were undertaken in the 1990s. These involved sizable macroeconomic adjustment processes, e.g., transition from planned to market economy, liberalization of prices, and privatization of state assets.Starting from the hypothesis that closer economic integration between countries may lead to increased real income per capita convergence, this paper investigates convergence in real incomes per person between the 27 current member states of the EU for the time horizon 1970-2010. We employ an empirical convergence test derived from a neoclassical growth model augmented with endogenous technological progress which differs across countries and over time. The model implies that the transition path of each economy toward the steady state level of per capita real income depends on country-specific technological growth rates. This approach enables us to study various types of economic transition behavior, e.g., temporary divergence followed by catching-up and convergence. In addition, the convergence test is applied in an iterative manner in order to identify convergent country groups, or so-called 'convergence clubs'.Our results offer important insights on the economic catch-up exhibited by the new EU members in light of the institutional changes and macroeconomic adjustment processes experienced in recent decades. The main results can be summarized as follows. We do not find overall real income per capita convergence in the EU. This result is robust to any time horizon considered. Instead, we discover country groups that converge to different income levels in the long-run. Regional linkages seem to play a significant role in determining the formation of convergence clubs. Yet, eurozone countries belong to distinct subgroups, thus clustering is not necessarily related to EMU membership. Moreover, there is a clear separation between the CEEC and the old EU members in the long run, suggesting that, even though the CEEC have exhibited higher real income growth than the EU average over the last 40 years, catching up was not sufficient in order to eliminate cross-country real income per capita differences. Finally, we observe a South-East vs. North-West division of European economies by the mid-nineties.Our results draw attention to the lack of growth-enhancing structural reforms in EU countries, posing a threat to the achi...

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Section: Related Literaturementioning

confidence: 96%

The evolution of economic convergence in the European Union

2014

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“…For the EU countries, such income growth is important if excessive population movements from the new members to the old are to be avoided and if the EU's budget is not to be strained by transfers to lagging economies. In other words, real convergence has significant fiscal and monetary policy implications (Kutan and Yigit, 2007).…”

Section: Introductionmentioning

confidence: 99%

European integration, productivity growth and real convergence: Evidence from the new member states

Kutan

Yigit

2009

Economic Systems

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We estimate the determinants of labor productivity growth in 8 new European Union (EU) member states that joined the Union in 2004. Our focus is on the impact of globalization and EU integration efforts on labor productivity growth. Previous studies test the impact of trade using either exports or trade openness. We also test the impact of imports separately on labor productivity growth. Using panel data for 1995-2006 period, we find that globalization has mixed effects. FDI and exports improve productivity, but imports hurt it. Regarding domestic variables, we find that human capital is the most important source of labor productivity growth in the new member states. There is also considerable adjustment of labor productivity towards EU15 levels, indicating significant "catching up" and hence real convergence. Policy implications of the findings are also discussed. © 2009 Elsevier B.V. All rights reserved

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“…The rest of the public and private managers of the "on going" projects have lost the possibility of exploiting EU funds that have not been transferred by the EU to Italian Regions. Considering this is a complex situation, recently, economic literature has shown a deep interest in Cohesion policy impact on economic growth since it has become a countercyclical tool, being not anymore a simple instrument for promoting convergence [37,38]. However, there is no consensus in Structural funds' impact on economic growth.…”

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The Impact of Institutional Quality and Efficient Cohesion Investments on Economic Growth Evidence from Italian Regions

Arbolino

Boffardi

2017

Sustainability

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Literature stresses that efficient institutions are necessary to achieve the highest returns from public policies. It has been recognized by the European Union (EU) that regional institutions have a fundamental role in obtaining the highest results from Cohesion and Structural investments, which represent the main fiscal and anticyclical instruments available for the regions. The paper aims at analyzing the impact of the quality of regional governments, and their management of EU cohesion funds on the economic growth of Italian regions. In order to measure the quality of institutions, we have combined the Institutional Quality Index (IQI) with a set of efficiency indexes, calculated in order to evaluate the ability of regional policymakers to manage European Funds. We conduct a two-way fixed effect panel regression model during the period between 2007 and 2015. The results underline that, in general, Cohesion investments and IQI are positively related to the regional growth; instead, efficiency indexes are important key factors mainly in the Southern area, characterized by structural weaknesses.

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European Integration, Productivity Growth and Real Convergence

Cited by 14 publications

References 65 publications

The evolution of economic convergence in the European Union

The evolution of economic convergence in the European Union

European integration, productivity growth and real convergence: Evidence from the new member states

The Impact of Institutional Quality and Efficient Cohesion Investments on Economic Growth Evidence from Italian Regions

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