Great Recession and club convergence in Europe: A cross‐country, cross‐region panel analysis (2000–2015)

Abstract

The paper aims at investigating the impact of the Great Recession on per capita GDP convergence process across European regions and countries. Using the time-varying factor model developed by Phillips and Sul for the period 2000-2015 and two different merging procedures to identify clubs, we provide evidence of the diverging impact of the Great Recession "between" the higher and the lower convergence clubs at both regional and country levels as well as of the strengthening of the convergence process "within" most clubs. In addition, we add further evidence to the common belief of a "multi-speed" Europe by contrasting Eastern European countries' and regions' behavior visà-vis original European members' one, and by identifying the factors that affect club membership and resilience to the recent economic downturn. We find that the membership in the higher clubs and resilience to the Great Recession are positively affected by the presence of several local-specific factors and macroeconomic characteristics.

Regional economic growth and inequality in Greece

“…This also means that the recent “cycle” of economic contraction, which started with the crisis of 2008, might be accompanied by diminishing regional inequalities in the years to come. However, this finding is not conclusive and may depend on several factors related not only to the nature of the crisis and its transmission mechanisms, but also the effectiveness of regional policy, which can decrease during crises (Mazzola & Pizzuto, 2020).…”

“…On the one hand, although regional differences seem to have narrowed between EU member states since the 1980s, regional imbalances, especially within countries, still persist (Iammarino, Rodriguez‐Pose, & Storper, 2019). On the other hand, if we account for the forces that affect regional inequality, regions within the EU can be seen to have been experiencing a period of unprecedented change and transformation as a result of the processes of globalization and economic integration, which has left several of the world's richest regions marginalized (Neumark, 2017); the economic crisis of 2008, which triggered rising inequality in several cases (Brakman, Garretsen, & van Marrewijk, 2015; Capello, Caragliu, & Fratesi, 2015; Mazzola & Pizzuto, 2020) along with political changes (e.g., the surge of populism and anti‐establishment extremism), which can also be linked with changes in regional inequality (Artelaris & Tsirbas, 2018; Dijkstra, Poelman, & Rodríguez‐Pose, 2019). Moreover, the current COVID‐19 crisis holds the potential to further increase regional inequality (Bailey et al, 2020).…”

Beta Convergence Analysis of Gross Value Added in the High-Technology Manufacturing Industries

“…A recent study examines the convergence of countries in terms of productivity, highlighting that the better initial level of education, higher institutional quality, political stability, greater complexity of economies, policies that encourage participation in global value chains have influenced, since 2000, the transition of countries to the group of high level convergence countries, contributing to the reduction of the existing gaps (Kindberg-Hanlon & Okou, 2020). Also, the impact of local specific factors and macroeconomic characteristics were found as positively influencing the recovery after recession for high convergence club countries from EU (Mazzola & Pizzuto, 2020). Other studies analyzed the positive impact of innovation and international trade for the convergence process in developing countries from Central and Easter Europe (Grela et al, 2017).…”

Regional polarization in Turkey

“…In this context, there has been increasing number of cross‐section and panel data studies that have focused on the regional inequalities in the EU. A considerable number of studies analysed the process of convergence of incomes among European regions (e.g., Barro & Sala‐i‐Martin, 2003; Boldrin & Canova, 2001; Fingleton & Lopéz‐Bazo, 2006; De Dominicis, 2014; Mazzola & Pizzuto, 2020; Meliciani & Peracchi, 2006; Perugini & Martino, 2008; Petrakos & Artelaris, 2009). In a recent paper, Mazzola and Pizzuto (2020) focus on the impact of the Great Recession on per capita GDP convergence process across European regions and countries.…”